16 2019 cv l - turtle talk...16-2019-cv(l) 16-2132-cv(con), 16-2135-cv(con), 16-2138-cv(con),...

IN THE

United States Court of AppealsFOR THE SECOND CIRCUIT

JESSICA GINGRAS, ON BEHALF OF HERSELF AND OTHERS SIMILARLY SITUATED,

ANGELA C. GIVEN, ON BEHALF OF HERSELF AND OTHERS SIMILARLY SITUATED,

Plaintiffs-Appellees,v.

THINK FINANCE, INC., TC LOAN SERVICE, LLC, KENNETH E. REES, FORMER PRESIDENT

AND CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF THINK FINANCE,

TC DECISION SCIENCES, LLC, TAILWIND MARKETING, LLC, SEQUOIA CAPITAL

OPERATIONS, LLC, TECHNOLOGY CROSSOVER VENTURES, JOEL ROSETTE, OFFICIAL

CAPACITY AS CHIEF EXECUTIVE OFFICER OF PLAIN GREEN, TED WHITFORD, OFFICIAL

CAPACITY AS A MEMBER OF PLAIN GREEN’S BOARD OF DIRECTORS, TIM MCINERNEY,

Defendants-Appellants.

>> >>

BRIEF FOR PLAINTIFFS-APPELLEES

JESSICA GINGRAS AND ANGELA C. GIVEN

Matthew B. Byrne

GRAVEL & SHEA PC

76 Saint Paul Street, 7th Floor

P.O. Box 369

Burlington, Vermont 05402

802-658-0220

Kathleen M. Donovan-Maher

Steven J. Buttacavoli

Anne F. O’Berry

Steven L. Groopman

BERMAN DEVALERIO

One Liberty Square

Boston, Massachusetts 02109

617-542-8300

On Appeal from the United States District Courtfor the District of Vermont

16-2019-CV(L)16-2132-cv(CON), 16-2135-cv(CON), 16-2138-cv(CON), 16-2140-cv(CON)

Attorneys for Plaintiffs-AppelleesJessica Gingras, on behalf of herself and others similarly situated, Angela C. Given, on behalf of herself and others similarly situated

Case 16-2019, Document 164, 12/30/2016, 1937820, Page1 of 118

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ..................................................................................... v

JURISDICTIONAL STATEMENT .......................................................................... 1

STATEMENT OF THE ISSUES............................................................................... 1

STATEMENT OF THE CASE .................................................................................. 2

A. Factual Background ............................................................................... 2

B. The Fraudulent Enterprise. .................................................................... 4

C. The Illegal Loan Practices ..................................................................... 7

D. The Purported Arbitration Agreement ................................................... 9

E. Rees and Think Finance Continue to Exert Control Over The

Tribe ..................................................................................................... 13

PROCEDURAL HISTORY ..................................................................................... 16

STANDARD OF REVIEW ..................................................................................... 17

SUMMARY OF ARGUMENT ............................................................................... 18

ARGUMENT ........................................................................................................... 20

I. TRIBAL IMMUNITY DOES NOT BAR THIS ACTION. .......................... 20

A. The Tribal Defendants Concede That Ms. Given’s EFTA Claim Is

Viable. ................................................................................................. 20

B. Tribal Immunity Does Not Extend To Plain Green Or Its Officers

Because Plain Green Is A Fraud. ........................................................ 21

1. Plaintiffs Have Never Conceded That Plain Green Or Its

Officers Are Entitled To Tribal Immunity. ............................... 21


TABLE OF CONTENTS—Continued

Page

- ii -

2. This Court May Ignore Corporate Forms When Considering

Tribal Immunity. ....................................................................... 24

C. Tribal Officials Are Subject To Official Capacity Actions Based On

Violations Of State Law. ..................................................................... 26

1. State Law Can Be Enforced Through Official Capacity

Actions. ..................................................................................... 27

2. The District Court Did Not Wipe Away A Century Of Ex parte

Young Precedent. ....................................................................... 29

3. Pennhurst Does Not Address Tribal Official Capacity

Actions. ..................................................................................... 32

4. Bay Mills’s State Enforcement Discussion Is Not Dicta .......... 34

a. The parties in Bay Mills briefed the issue of whether

state law could be enforced through official capacity

actions ............................................................................. 34

b. The Bay Mills Court’s statements about official capacity

actions for violations of state law were essential to its

holding. ........................................................................... 37

c. Official capacity suits have always been available to

private parties .................................................................. 38

D. The Tribal Defendants’ Argument That Rico Does Not Substantively

Apply In This Case Is Incorrect. ......................................................... 39

1. The Court Has No Jurisdiction To Consider The Tribal

Defendants’ Rico Arguments .................................................... 39

2. Rico Applies To The Tribal Defendants .................................... 40

3. The Tribal Defendants’ Rico Arguments Are Inconsistent With

The Supreme Court’s Understanding Of Rico And Municipal

Liability ..................................................................................... 44



Page

- iii -

4. Rico Does Not Protect Individuals Acting In Their Official

Capacity .................................................................................... 48

5. Garcia Only Addressed On-Reservation Activity .................... 51

6. The District Court Did Not Abuse Its Discretion In Granting

Discovery .................................................................................. 51

II. THIS COURT SHOULD NOT ENFORCE THE ARBITRATION

AGREEMENT BECAUSE IT IS UNCONSCIONABLE AND

FRAUDULENT. ............................................................................................ 53

A. The Plain Language Of The Purported Arbitration Agreement Does

Not Cover This Dispute ....................................................................... 53

B. The Delegation Clause And The Purported Arbitration Agreement

Are Unenforceable .............................................................................. 54

1. The Purported Arbitration Agreement Is Unconscionable........ 55

a. Three Circuit Courts of Appeal have found similar

agreements unconscionable ........................................... 55

b. Under Vermont Law, the Proposed Arbitration Process

is illusory because Defendants purchased the law

governing the arbitration and have not relinquished

tribal immunity ............................................................... 58

c. The Proposed Arbitration Process is illusory because

Chippewa Cree Tribal Courts do not have jurisdiction

to determine the questions reserved to them .................. 63

d. The Purported Arbitration Agreement is unenforceable

because it has several features that are both

procedurally and substantively unconscionable ............. 66

2. The Court Should Apply Vermont Law When Examining The

Purported Arbitration Agreement. ............................................. 68



Page

- iv -

3. Governance Concerns Within The Chippewa Cree Tribe

Frustrate The Intention Of The Purported Arbitration

Agreement ................................................................................. 73

4. The Purported Arbitration Agreement Is Fraudulent ................ 73

5. The Purported Right To Opt Out Of Arbitration Is Illusory ..... 77

6. The Doctrine of Severability Is Inapplicable ............................ 78

C. The Delegation Clause Is Invalid. ....................................................... 79

1. The Delegation Clause Does Not Clearly And Unmistakably

Delegate The Issue Of Arbitrability To The Arbitrator ........... 79

2. The Delegation Clause Is Unconscionable ............................... 87

3. The Delegation Clause Is Fraudulent ........................................ 89

4. Defendants Incorrectly Identify The Delegation Clause .......... 94

5. Plaintiffs Are Specifically Challenging The Delegation

Clause ........................................................................................ 95

D. The Payday Lenders Cannot Take Advantage Of The Purported

Arbitration Agreement ........................................................................ 96

IV. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN

ALLOWING DISCOVERY ........................................................................ 103

CONCLUSION ...................................................................................................... 105

CERTIFICATE OF COMPLIANCE


- v -

TABLE OF AUTHORITIES

Federal Cases

Alabama v. PCI Gaming Auth., 801 F.3d 1278 (11th Cir. 2015) ............................ 32

Allen v. Dairy Farmers of Am., Inc., 748 F. Supp. 2d 323 (D. Vt. 2010) ............... 98

Allen v. Gold Country Casino, 464 F.3d 1044 (9th Cir. 2006) ............................... 25

Anderson v. Abbott, 321 U.S. 349 (1944) ................................................................ 24

Anderson-Myers Co. v. Roach, 666 F. Supp. 106 (D. Kan. 1987) .......................... 50

Applied Energetics, Inc. v. Newoak Capital Mrkts., LLC, 645 F.3d 522

(2d Cir. 2011) ........................................................................................................... 98

AT&T Mobility v. Concepcion, 131 S.Ct. 1740, 1746 (2010) ................................. 54

Bank of United States v. Planter’s Bank of Georgia, 22 U.S. 904 (1824) .............. 22

Booth v. BMO Harris Bank, No. 13-5968, 2014 U.S. Dist. LEXIS 111053

(E.D. Pa. Aug. 11, 2014) ........................................................................................ 102

Campaniello Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655

(2d Cir. 1997) ..................................................................................................... 88, 89

Cargill Int’l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993)............... 103

Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) ............................ 49

Chavarria v. Ralphs Grocery Co., 733 F.3d 916 (9th Cir. 2013) ...................... 54, 55

Chevron Corp. v. Berlinger, 629 F.3d 297 (2d Cir. 2011) .................................... 104

Chevron Corp. v. Donzinger, 833 F.3d 74 (2d Cir. 2016) ....................................... 42

Chhabra v. U.S., 720 F.3d 395 (2d Cir. 2013)......................................................... 78

Comstock Oil v. Ala. & Coushatta Indian Tribes, No. 9:98-cv-266-TH,

Dkt # 153-2 (E.D.Tex. 1999) ................................................................................... 31

Comstock Oil & Gas v. Alabama & Coushatta Indian Tribes, 261 F.3d 567

(5th Cir. 2001) .............................................................................................. 30, 31, 39


TABLE OF AUTHORITIES—Continued

Page(s)

- vi -

Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d Cir. 2005) ....................... 83

County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295 (2d Cir. 1990) ....... 41

De Falco v. Bernas, 244 F.3d 286 (2d Cir. 2001) ............................................. 47, 49

Durante Bros & Sons, Inc. v. Flushing Nat’l Bank, 755 F.2d 239 (2d Cir. 1985) .. 43

Ex parte Young, 209 U.S. 123 (1907) ...............................................................passim

Federal Power Comm’n v. Tuscarora Indian Nation, 362 U.S. 99 (1960) ....... 40, 41

First City, N.A. v. Rafidain Bank, 150 F.3d 172 (2d Cir. 1998) ........................ 18, 23

First Options v. Kaplan, 514 U.S. 938 (1995) ......................................................... 79

Frazier v. Turning Stone Casino, 254 F. Supp. 2d 295 (N.D.N.Y. 2003) ............... 30

Frooks v. Town of Cortland, 997 F. Supp. 438 (S.D.N.Y. 1998) ............................ 50

Garcia v. Akwesasne Hous. Auth., 268 F.3d 76 (2d Cir. 2001) ............................... 51

Gent v. Wallingford Bd. of Educ., 69 F.3d 669 (2d Cir. 1995) ................................ 99

Genty v. Resolution Tr. Corp., 937 F.2d 899 (3d Cir. 1991) ............................. 44, 46

Graham v. BMO Harris Bank, No. 3:13CV1460, 2014 U.S. Dist. LEXIS 4090548

(D. Conn. July 16, 2014) ........................................................................................ 102

Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764

(3d Cir. 2013) ......................................................................................................... 104

Gunson v. BMO Harris Bank, N.A., 43 F. Supp. 3d 1396 (S.D. Fla. 2014) .......... 102

Hayes v Delbert Serv., 811 F.3d 666 (4th Cir. 2016) .......................................passim

Inetianbor v. CashCall, Inc., 768 F.3d 1346 (11th Cir. 2014) .......................... 55, 70

Inetianbor v. CashCall, Inc., 2015 U.S. Dist. LEXIS 2386 (U.S. Apr. 6, 2015) .... 55

In re Citisource, Inc. Sec. Litig., 694 F. Supp. 1069 (S.D.N.Y. 1988) .................... 50



Page(s)

- vii -

Jackson v. Payday Fin., LLC, 764 F.3d 765 (7th Cir. 2014) ................. 55, 56, 66, 70

Kemph v. Reddam, No. 13 CV 6785, 2015 U.S. Dist. LEXIS 38861

(N.D. Ill. Mar. 27, 2015) .......................................................................................... 58

Kiowa Tribe of Oklahoma v. Manufacturing Techs., Inc., 523 U.S. 751

(1998) ................................................................................................................. 24, 31

Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397

(9th Cir. 1991) .............................................................................................. 45, 46, 47

Littlejohn v. Timberquest Park at Magic, LLC, 116 F. Supp. 3d 422

(D. Vt. 2015) ............................................................................................................ 59

Mathers v. Wright, 636 F.3d 396 (8th Cir. 2010) .................................................... 40

McCullough v. Suter, 757 F.2d 142 (7th Cir. 1985) ................................................ 42

Menominee v. Tribal Enters. v. Solis, 601 F.3d 669 (7th Cir. 2010) ....................... 40

Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973) ......................................... 28

Michigan v. Bay Mills, 134 S. Ct. 2024 (2014) ................................................passim

Monell v. Department of Soc. Serv. of N.Y., 436 U.S. 658 (1977) .................... 41, 45

Montana v. United States, 450 U.S. 544 (1981) ................................................ 63, 65

Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167 (1963) ................... 89

Moss v. BMO Harris Bank, N.A., 24 F. Supp. 3d 281 (E.D.N.Y. 2014) ............... 102

NASDAQ OMX Group, Inc. v. UBS, Sec., LLC, 770 F.3d 1010 (2d Cir. 2014) ...... 85

Nevada v. Hicks, 533 U.S. 353 (2001) ............................................................... 28, 63

Newport v. Fact Concerts, 453 U.S. 247 (1991) ..............................................passim

Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505

(1991) ................................................................................................................. 29, 30



Page(s)

- viii -

Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Fin. Serv., 769 F.3d 105

(2d Cir. 2014) ..................................................................................................... 22, 28

Parm v. Nat’l Bank of Calif., 835 F.3d 1331 (11th Cir. 2016) .............. 55, 70, 87, 95

Parnell v. Cash Call, Inc., 804 F.3d 1142 (11th Cir. 2015) .................................... 82

Parnell v. Cash Call, Inc., No. 4:14-cv-0024, 2016 U.S. Dist. LEXIS 52516

(N.D. Ga. March 14, 2016) ...............................................................................passim

Parnell v. Cash Call, Inc., 2016 U.S. App. LEXIS 20774

(11th Cir. Nov. 21, 2016) ......................................................................................... 82

Pennhurst State School & Hospital v. Halderman, 465 U.S. 89 (1984) ........... 32, 33

Plains Commerce Bank v. Long Family Land Co., 554 U.S. 316 (2008) ......... 63, 64

Puyallup Tribe v. Dep’t of Game, 391 U.S. 392 (1968) .......................................... 29

Puyallup Tribe, Inc. v. Dep’t of Game, 433 U.S. 165 (1977) .................................. 29

Reich v. Mashantucket Sand & Gravel, 95 F.3d 174 (2d Cir. 1996) ....................... 40

Rent-A-Center, W., Inc. v. Jackson, 130 S.Ct. 2772 (2010) .............................passim

Rini v. Zwirn, 886 F. Supp. 270 (S.D.N.Y. 1995) ................................................... 50

Rogers v. City of New York, 359 Fed. App’x 201 (2d Cir. 2009) ............................ 51

Ross v. American Express, 547 F.3d 137, 144 (2d Cir. 2008) .........98, 101, 102, 103

Ryan v. Delbert Servs. Corp., No. 5:15-cv-5044, 2016 U.S. Dist. LEXIS 121246

(E.D. Pa. Sept. 8, 2016)................................................................................ 54, 87, 88

Salt River Project Agr. Improvement & Power Dist. v. Lee, 672 F.3d 1176

(9th Cir. 2012) .......................................................................................................... 39

San Manuel Indian Bingo & Casino v. NLRB, 475 F.3d 1306 (D.C. Cir. 2006) .... 40

Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978) .............................................. 29

Schnabel v. Trilegant Corp., 697 F.3d 110 (2d Cir. 2012) .................. 17, 18, 99, 105



Page(s)

- ix -

Sedima, S.P.R.L. v. Imrex, Inc., 473 U.S. 479 (1985) ............................................. 44

Seminole Tribe v. Florida, 517 U.S. 44 (1996) ....................................................... 37

Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354, 358 (2d Cir. 2008) ... 97, 98

Southern Ry. Co. v. North Carolina Ry. Co., 81 F. 595 (1897) ............................... 22

Strate v. A-1 Const., 520 U.S. 438 (1997) ............................................................... 64

T. Co. Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329

(2d Cir. 2010) ........................................................................................................... 82

TTEA v. Ysleta Del Sur Pueblo, 181 F.3d 676 (5th Cir. 1999) .......................... 31, 32

United States v. Angelilli, 660 F.2d 23 (2d Cir. 1981) ................................ 41, 42, 49

United States v. Frumento, 563 F.2d 1083 (3d Cir. 1977) ...................................... 46

United States v. Garner, 837 F.2d 1404 (7th Cir. 1987) ......................................... 50

United States v. Lara, 541 U.S. 193 (2004) ............................................................. 40

United States v. Minicone, 960 F.2d 1099 (2d Cir. 1992) ....................................... 42

United States v. Morrison, 686 F.3d 94 (2d Cir. 2012) ........................................... 46

United States v. Morrison, 580 Fed. Appx. 20 (2d Cir. 2014) ................................ 46

United States v. Morsette, No. 4:15-cr-61 (D. Mont. Nov. 12, 2015) ..................... 51

United States v. Oreto, 37 F.3d 739 (1st Cir. 1994) ................................................ 43

United States v. Rosette, No. 4:15-cr-61 (D. Mont. Nov. 16, 2015) ....................... 52

United States v. Turkette, 452 U.S. 576 (1981) ................................................. 42, 44

United States v. Warner, 498 F.3d 666 (7th Cir. 2007) ........................................... 49

United States v. Winter, 237 F.3d 170 (2d Cir. 2001) ............................................. 40

Vann v. Department of Interior, 701 F.3d 927 (D.C. Cir. 2012) ............................. 39



Page(s)

- x -

Warren v. United States, 859 F. Supp. 2d 522 (W.D.N.Y. 2012) ........................... 30

Will v. Michigan Dep’t of State Police, 491 U.S. 58 (1988) ................................... 26

Willams v. Cashcall, Inc., 92 F. Supp. 3d 847 (E.D. Wis. 2015) ............................ 58

Worchester v. Georgia, 31 U.S. 515 (1831) ............................................................ 23

Yaroma v. Cashcall, Inc., 130 F. Supp. 3d 1055 (E.D. Ky. 2015) .......................... 57

State Cases

Comstock v. Shannon, 116 Vt. 245 (1950) .............................................................. 76

Glassford v. BrickKicker, 2011 VT 118 ...................................................... 58, 59, 78

Kimco Leasing Co. v. Lake Hortonia Properties, 161 Vt. 425 (1993) .................... 99

Land Fin. Corp. v. Sherwin Elec. Co., 102 Vt. 73 (1929) ....................................... 76

Sarvis v. Vermont State Colleges, 172 Vt. 76 (2001) .............................................. 76

SKI, Ltd. v. Mountainside Props., 2015 VT 33 ........................................................ 73

Val Preda Leasing, Inc. v. Rodriguez, 149 Vt. 129 (1987) ..................................... 58

Federal Statutes

9 U.S.C. § 2 .................................................................................................. 54, 59, 93

9 U.S.C. § 4 ............................................................................................................ 105

9 U.S.C. § 5 .............................................................................................................. 81

9 U.S.C. § 10 ............................................................................................................ 93

15 U.S.C. § 1693m ................................................................................................... 20

18 U.S.C. § 1961(3) ................................................................................................. 41



Page(s)

- xi -

18 U.S.C. § 1962 ...................................................................................................... 41

18 U.S.C. § 1964(a) ................................................................................................. 42

28 U.S.C. § 1331 ........................................................................................................ 1

28 U.S.C. § 1332 ........................................................................................................ 1

28 U.S.C. § 1367 ........................................................................................................ 1

State Statutes

9 V.S.A. § 2461 ........................................................................................................ 39

Other Authorities

Organized Crime Control Act, Pub. L. No. 91-452 (1970) ..................................... 43

Restatement (Second) Contracts § 265 .................................................................... 73


- 1 -

JURISDICTIONAL STATEMENT

The District Court has jurisdiction over this case pursuant to 28 U.S.C.

§§1331, 1332, and 1367. The assertion of tribal immunity by Defendants-

Appellants Joel Rosette, Ted Whitford, and Tim McInerney (the “Tribal

Defendants”) does not deprive the District Court of jurisdiction. See Michigan v.

Bay Mills, 134 S.Ct. 2024, 2029 n.2 (2014).

STATEMENT OF THE ISSUES

1. Whether the District Court correctly ruled that the Tribal Defendants

may not use tribal immunity to avoid liability for fraudulent conduct that occurred

off the reservation and violated both federal and state law.

2. Whether the District Court correctly ruled that the Purported

Arbitration Agreement and its Delegation Clause are unconscionable and

unenforceable under the Federal Arbitration Act.

3. Whether this Court should remand this case, if necessary, to the

District Court so that discovery can be conducted to uncover additional facts about

the fraudulent creation of Chippewa Cree law and the intimidation of the

Chippewa Cree judiciary and so that a jury trial can be conducted on the issue of

fraud in the inducement of the Purported Arbitration Agreement.


- 2 -

STATEMENT OF THE CASE

A. Factual Background.

In their First Amended Complaint (“Complaint”), Plaintiffs Jessica Gingras

and Angela Given explain how they fell victim to a sophisticated loan sharking

operation that was specifically designed by Defendants to ensnare unsuspecting

victims. A32, ¶21. Ms. Gingras and Ms. Given visited a bright and cheerful

website that promised to help them secure a loan. Id. This website informed

visitors that with an easy online application they could obtain an answer within a

matter of seconds:

Id.

The website proclaimed that Plain Green was a better option than a payday

loan:


- 3 -

A33, ¶22.

However, the cheerful cartoon characters did not tell the whole story. A33,

¶23. The reality of Defendants’ operation is far different than these shiny,

innocent-looking characters suggest. Id. Plaintiffs allege that the Plain Green

enterprise was created when Kenneth Rees, the mastermind of this illegal scheme,

had his former business, ThinkCash, shut down by federal regulators. Id. Rees

was undeterred by this setback and sought a new way to prey on unsuspecting

borrowers. Id. Rees believed that tribal immunity was the answer. Id. So, Rees

and his rebranded company, Think Finance, approached the Chippewa Cree Tribe

of the Rocky Boy’s Reservation (“Chippewa Cree” or the “Tribe”) with a deal. Id.

Rees and Think Finance would provide everything needed to run a successful

payday loan enterprise if the Tribe would let them use the concept of tribal

immunity to stymie state and federal regulators. Id. In return, the Tribe would

receive 4.5% of the enterprise’s revenues. Id.; A73-77 at A74.


- 4 -

Two Silicon Valley venture capital firms, Sequoia Capital Operations, LLC

(“Sequoia”) and Technology Crossover Ventures (“TCV”), became embroiled in

this unlawful enterprise. A59, ¶154. Plaintiffs allege that both Sequoia and TCV

provided money to fuel the illegal Plain Green loan sharking operation. Id. After

Plaintiffs filed their Complaint, they uncovered facts indicating that both of these

venture capital firms did more than just provide financial backing for the Plain

Green enterprise; they each had representatives that served on Think Finance’s

Board of Directors. A277-78, ¶¶ 1-4.

B. The Fraudulent Enterprise.

Plaintiffs allege that prior to launching Plain Green in 2011, Rees created

ThinkCash, Inc. (“ThinkCash”), which was a payday lender that operated over the

internet. A36, ¶37. To avoid state and federal limits on interest rates, ThinkCash

used a model known in the money lending industry as “rent-a-bank.” Id. ¶ 38.

Under this scheme, ThinkCash marketed, funded, and collected loans and

performed other functions for borrowers throughout the country. Id. Although

ThinkCash was the actual lender, the nominal lender was a now-dissolved

federally chartered bank based in Delaware called First Bank of Delaware

(“FBD”). The participants in this “rent-a-bank” scheme attempted to rely on

federal bank preemption to evade state laws that prohibited extortionate interest

rates. A36-37, ¶¶39-41. In 2008, federal regulators initiated an enforcement


- 5 -

action to thwart this practice. A36-37. ¶40. This enforcement action culminated in

a consent order that required FBD to end its relationship with ThinkCash. A37,

¶41. After FBD’s shareholders voted to dissolve the bank in 2012, the United

States Department of Justice announced that FBD would pay a $15 million civil

penalty for its participation in “rent-a-bank” schemes. A37, ¶¶42-44.

After federal regulators intervened, Kenneth Rees rebranded his company as

Think Finance, Inc. (“Think Finance”) and moved on to a scheme that the money

lending industry called “rent-a-tribe.” A33,37, ¶¶33,42-44. The “rent-a-tribe”

scheme attempts to take advantage of tribal immunity in the same way that

ThinkCash attempted to take advantage of federal bank preemption. A37, ¶¶42-44.

In March 2011, Rees and Think Finance approached the Chippewa Cree

about forming a tribal entity to conduct an illegal scheme that would operate “on a

nationwide basis through the internet.” A43, ¶78, A77. As part of the

negotiations, Rees and Think Finance prepared a term sheet that reflected the

essentials of the transaction (the “Term Sheet”). A43, ¶78, A73-77. When they

created this Term Sheet and started the Plain Green enterprise, Rees and Think

Finance were attempting to evade liability for violating various laws. A36, ¶36;

A44, ¶82. According to the sworn affidavit of Neal Rosette, Plain Green’s former

CEO, which was uncovered after Plaintiffs filed their Complaint, “[t]he primary

reason that Think Finance, Inc. was so interested in partnering with an Indian Tribe


- 6 -

was to circumvent the various State laws governing interest rates on payday and

other sub-prime loans.” A87, ¶7.

As part of their negotiations with the Tribal Defendants, Rees and Think

Finance dictated the content of Chippewa Cree law and ensured that the law would

be favorable to them and their predatory loan practices. A43, ¶79 quoting A73.

The Term Sheet stated that: “The Tribe will adopt a finance code that is acceptable

to all parties and provide for licensing of an arm of the tribe to engage in consumer

lending.” A73. The Term Sheet also required the Tribe to use “best efforts” to

“[r]evise the Tribal Credit Transaction Code to provide for a broader array of

lending products.” A75. The Chippewa Cree Tribal Lending and Regulatory Code

that Defendants cite appears to confirm that the Tribe’s “finance code” was revised

after the Term Sheet was created. A315 (noting dates of revision in 2013, 2014,

and 2015).

To further Defendants’ illegal scheme, the Tribal Defendants restricted

access to Chippewa Cree law by making it unavailable to the public through the

internet and other means. A54, ¶128. Organizations – like law school libraries –

will not provide a copy of the Chippewa Cree law by remote access because the

Tribal Defendants have not granted them the right to do so. Id; see also A79-81,

¶¶12-19.


- 7 -

The Term Sheet not only dictated the contents of Chippewa Cree law, but it

required the Tribe to use Pepper Hamilton LLP (“Pepper Hamilton”) as its legal

counsel. A46 ¶91 quoting A75. Neal Rosette, Plain Green’s former CEO, stated

that, “[p]rior to Think Finance Inc.’s engagement with Plain Green, LLC, the Tribe

had not previously used the legal services of Pepper Hamilton nor had the Tribe

had any knowledge that Pepper Hamilton even existed.” A88, ¶11. In fact, “Think

Finance, Inc. brought Pepper Hamilton to the Tribe even though the Tribe had

retained the services of [another attorney] handling all Tribal lending activities.”

A88, ¶11. “Although Pepper Hamilton nominally represented the Tribe in

contracting with Plain Green, LLC, its fees were paid for by Think Finance, Inc.

and Pepper Hamilton received a bonus for getting the Tribe to sign on to the

agreement with Think Finance.” A75; A88, ¶12. The association between Think

Finance and Pepper Hamilton was so close that Think Finance did not bother to

send its own attorneys to meetings with the Tribe. A89, ¶13. Pepper Hamilton

represented the Tribal Defendants in the District Court and continues to represent

them in this Court.

C. The Illegal Loan Practices.

Plaintiffs allege that when Rees and Think Finance created the Plain Green

enterprise, they not only provided the Tribal Defendants with all of the essential

tools for running the illegal payday loan scheme, they dictated how the scheme


- 8 -

would be carried out. A44-45, A53. Specifically, Plaintiffs allege that Rees and

Think Finance:

required that Plain Green charge usurious rates between 60% and

360%, A44, ¶84;

set the minimum repayment period of two months and the maximum

repayment period of two years, A44, ¶83;

set the maximum amount of the loan at $2,500, A44, ¶83;

provided the capital used to make the loans, A53, ¶124; A73;

provided the software to determine if the loans would be profitable,

A43-44, ¶80;

provided “risk management, application processing, underwriting

assistance, payment processing, and ongoing customer service

support . . .” A44, ¶80;

required Plain Green to enter into a U.S. banking relationship to

process loan transactions using the ACH system, A45, ¶85; and

required Plain Green to establish a reserve account to “deal with any

regulatory issues, lawsuits or other controversies involving the Tribe

or its lending activities,” A45, ¶86.


- 9 -

D. The Purported Arbitration Agreement.

As part of the loan process, Defendants required all borrowers to sign a loan

agreement that included an arbitration provision that would govern any disputes

(this arbitration provision is referred to as the “Purported Arbitration Agreement”

or “Agreement”). A51, ¶118. Plaintiffs allege that this Agreement is

unenforceable. Doc. 85 at 41-71. It contained a number of material misstatements,

including that (1) Plain Green was the lender, (2) Chippewa Cree law governed the

transaction, and (3) state law did not apply. A53-54, ¶124-126. Plaintiffs also

allege that the Agreement failed to reveal that Plain Green was merely a front

company created to allow Rees and Think Finance to hide behind the Tribe’s

immunity. Id. It did not disclose that Rees and Think Finance created the

Chippewa Cree law that would permit Plain Green to make loans at rates that are

illegal under state and federal law. Id.

Plaintiffs also allege that when Rees and Think Finance created the Plain

Green enterprise, they controlled the drafting and implementation of the Purported

Arbitration Agreement through their close association with Pepper Hamilton, the

attorneys who drafted the Plain Green loan documents including the Purported

Arbitration Agreement. A50, ¶110. The District Court agreed with Plaintiffs that

the Purported Arbitration Agreement was unconscionable and unenforceable.

SPA25-35.


- 10 -

The Agreement has a delegation clause that attempts to insulate Defendants’

behavior from state or federal court review by shifting all disputes to either an

arbitrator or a tribal court. A55, ¶131. The Agreement also requires the

application of Chippewa Cree law, which is the tribal law that Rees and Think

Finance purchased through the Term Sheet:

The arbitrator has the ability to award all remedies

available under Tribal Law, whether at law or in equity,

to the prevailing party, except that the parties agree that

the arbitrator has no authority to conduct class-wide

proceedings and will be restricted to resolving the

individual Disputes between the parties. The validity,

effect and enforceability of this waiver of class action

lawsuit and class-wide arbitration, if challenged, are to

be determined solely by a court of competent

jurisdiction located within the Chippewa Cree Tribe,

and not by the AAA, JAMS or an arbitrator. If the court

refuses to enforce the class-wide arbitration waiver, or if

the arbitrator fails or refuses to enforce the waiver of

class-wide arbitration, the parties agree that the Dispute

will proceed in Tribal court and will be decided by a

Tribal court judge, sitting without a jury, under

applicable court rules and procedures and may be

enforced by such court through any measures or

reciprocity provisions available. As an integral

component of accepting this Agreement, you irrevocably

consent to the jurisdiction of the Tribal courts for

purposes of this Agreement.

A265 (emphasis added).

In a separate provision, the Purported Arbitration Agreement seeks to avoid

federal court review by requiring that the tribal court confirm any arbitration


- 11 -

award. The Agreement also requires any judicial decision maker to apply the law

that Rees and Think Finance purchased through the rent-a-tribe scheme:

APPLICABLE LAW AND JUDICIAL REVIEW OF

ARBITRATOR’S AWARD: THIS AGREEMENT TO

ARBITRATE IS MADE PURSUANT TO A

TRANSACTION INVOLVING THE INDIAN

COMMERCE CLAUSE OF THE CONSTITUTION OF

THE UNITED STATES OF AMERICA, AND SHALL

BE GOVERNED BY THE LAW OF THE CHIPPEWA

CREE TRIBE. The arbitrator shall apply Tribal Law

and the terms of this Agreement, including this

Agreement to Arbitrate and the waivers included herein.

The arbitrator may decide, with or without a hearing, any

motion that is substantially similar to a motion to dismiss

for failure to state a claim or a motion for summary

judgment. The arbitrator shall make written findings and

the arbitrator’s award may be filed with a Tribal court.

The arbitration award shall be supported by substantial

evidence and must be consistent with this Agreement

and Tribal Law, and if it is not, it may be set aside by a

Tribal court upon judicial review.

A265 (italics and bold emphasis added; all caps in original).

In several other places in the Agreement, Rees and Think Finance, with the

cooperation of the Tribal Defendants, attempted to ensure that federal courts would

never review any dispute and that the law they purchased would be used in any

arbitration. For example, if a party to the Agreement attempts to opt out of

arbitration, the Agreement states that the party will be opting in to an adjudication

conducted by a Chippewa Cree tribal court using the Chippewa Cree law that was

purchased by Defendants:


- 12 -

IN THE EVENT YOU OPT OUT OF THE WAIVER OF

JURY TRIAL AND ARBITRATION AGREEMENT,

ANY DISPUTES SHALL NONETHELESS BE

GOVERNED UNDER THE LAWS OF THE

CHIPPEWA CREE TRIBE AND MUST BE BROUGHT

WITHIN THE COURT SYSTEM THEREOF.

A263.

The venue clause of the Purported Arbitration Agreement also requires

borrowers pursuing arbitration to confirm the enterprise’s claim for tribal

immunity and to waive any right to use any law other than the purchased

Chippewa Cree law:

LOCATION OF ARBITRATION: Any arbitration under

this Agreement may be conducted either on Tribal land

or within thirty (30) miles of your residence, at your

choice, provided that this accommodation for you shall

not be construed in any way (a) as a relinquishment or

waiver of the sovereign status or immunity of the Tribe,

or (b) to allow for the application of any law other than

Tribal Law.

A264.

In other places, the Agreement expressly disclaims the applicability of both

federal and state law: “The Lender may choose to voluntarily use certain federal

laws as guidelines for the provision of services. Such voluntary use does not

represent acquiescence of the Chippewa Cree Tribe to any federal law unless found

expressly applicable to the operations of the Chippewa Cree Tribe offering such

services.” A263. It also states that: “Neither this Agreement nor the Lender is


- 13 -

subject to the laws of any state of the United States.” A263. The Agreement states

that “[t]his Consumer Installment Loan Agreement (this [‘]Agreement[’]) is

subject solely to the exclusive laws and jurisdiction of the Chippewa Cree Tribe of

the Rocky Boy Indian Reservation” and that “no other state or federal law or

regulation shall apply to this Agreement, its enforcement or interpretation.” A258.

The Purported Arbitration Agreement also prevents the arbitration

organization’s rules from interfering with the result dictated by the law that Rees

and Think Finance purchased. The Agreement states: “The policies and

procedures of the selected arbitration firm applicable to consumer transactions will

apply provided such policies and procedures do not contradict this Agreement to

Arbitrate or Tribal Law. To the extent the arbitration firm’s rules or procedures are

different than the terms of this Agreement to Arbitrate, the terms of this Agreement

to Arbitrate will apply.” A264.

E. Rees and Think Finance Continue to Exert Control Over The Tribe.

After filing the Complaint, Plaintiffs uncovered more facts that suggest that

Rees and Think Finance directed the internal affairs of the Tribe. A88. According

to a sworn affidavit of former Plain Green CEO Neal Rosette, Think Finance

directed the ouster of Ken Blatt-St. Marks (“St. Marks”), Chairman of the Tribe’s

Business Committee, after St. Marks questioned the division of Plain Green’s

profits. A88, ¶¶9-10. Mr. Rosette stated in his affidavit:


- 14 -

After Chairman St. Marks’ remarks, Think Finance Inc.

met with tribal council members and told them that

Chairman St. Marks needed to be removed from office or

Think Finance Inc. would pull out of the business

arrangement. Think Finance, Inc. specifically instructed

the tribal council members to impeach Chairman St.

Marks. I have personal knowledge of this because it was

revealed to me by John “Chance” Houle prior to

Chairman St. Marks being impeached the first time.

After Mr. Houle revealed that information to me,

Chairman St. Marks was impeached.

A88, ¶10; see also A279, ¶8.

In March 2013, the Business Committee fired St. Marks, but the United

States Department of the Interior found that the Tribe had to reinstate him because

he was protected by federal whistleblower statutes. A57, ¶143. According to an

anonymous witness interviewed by the Department of the Interior, “the Business

Committee removed Blatt-St. Marks as Chairman to continue to hide their wrong

doings.” SA16; see also A279, ¶8. The witness also reported that “every single

one of the Business Committee members have taken something, i.e. money,

equipment, vehicles.” Id.

Plaintiffs allege numerous other facts indicating that the leadership of the

Tribe is in substantial turmoil and flux. A55-56. There is a large investigation into

bribery at the Tribe, and several former officials have been convicted of, or pled

guilty to, embezzlement and bribery. A55-56, ¶132-35. For example, John

Chance Houle (“Houle”), the former Chairman of Plain Green, pled guilty to


- 15 -

several federal felonies, including theft from a Tribal organization, embezzlement,

and income tax evasion. A56, ¶135. Houle signed the Term Sheet on behalf of the

Tribe and Plain Green. A76. Neal Rosette, Plain Green’s former CEO, and Billi

Anne Raining Bird Morsette, Plain Green’s former CFO, were involved in a

separate fraudulent kickback scheme. A57, ¶138-139. After the Complaint was

filed, they both pled guilty to federal felonies related to the kickback scheme. See

A278, ¶6.

Plaintiffs allege that the corruption and instability extended to the Chippewa

Cree Tribal Judiciary. A57. In his dispute with the Business Committee, St.

Marks fired the Tribe’s Chief Judge and several other trial judges. A57, ¶140. An

interview of a former Chippewa Cree tribal judge conducted by the Federal Bureau

of Investigation (“FBI”) and the Office of the Inspector General for the United

States Department of the Interior demonstrates that the Chippewa Cree judiciary is

neither independent nor functional. A279. The former judge stated that when he

was deciding whether to issue a TRO related to the removal of St. Marks, “he

feared retaliation from both sides at the time – the Business Committee and St.

Marks – because both could do harm to him job-wise.” A279, ¶9; A281. The

judge said that “the removal of St. Marks as Chairman should never have been

effective because the Business Committee violated the CCT [Chippewa Cree

Tribe] Constitution.” A281. However, this judge entered the order removing St.


- 16 -

Marks even though he thought it was improper and unconstitutional because he

feared retaliation. Id.

PROCEDURAL HISTORY

After considering the facts alleged in the Complaint and the arguments

relating to Defendants’ motions to dismiss and compel arbitration, the District

Court found that the Purported Arbitration Agreement and the Delegation Clause

were unconscionable and unenforceable. SPA33-35. It determined that tribal

immunity did not bar an action against the Tribal Defendants for injunctive relief.

SPA7-13. Finally, the District Court held that Plaintiffs had sufficiently alleged

facts to support their claims for violations of the Racketeer Influenced and Corrupt

Organizations Act (“RICO”), the Vermont Consumer Fraud Act, the Electronic

Funds Transfer Act (“EFTA”), and unjust enrichment. SPA41-72.

In ruling on the motions to compel arbitration, the District Court declined to

apply Chippewa Cree law, which was allegedly purchased by Defendants, and

applied Vermont law instead. SPA26-29. The District Court also determined that

the Delegation Clause did not empower an arbitrator to decide the validity of the

Purported Arbitration Agreement. SPA31. The District Court concluded that it

should determine whether the case was arbitrable, finding: “If Plaintiffs are able to

prove that the tribal legal system, both with respect to its laws and to its judiciary,

are subject to improper influence and control by Defendants, then delegating the


- 17 -

question of arbitrability to the very system under attack is unlikely to result in a

fair evaluation of Plaintiffs’ claims . . . .” SPA32. The District Court held that

“[b]y incorporating the tribal financial law and making all arbitration reviewable

by the tribal court on both the law and the facts, the defendants have effectively

insulated themselves from claims they have violated state and federal laws.”

SPA35.

STANDARD OF REVIEW

The question of whether parties have agreed to arbitrate is reviewed de novo

to the extent that a district court’s conclusion was based on a legal determination,

but it is reviewed under a “clearly erroneous” standard to the extent that a district

court’s conclusion was based on findings of fact. Schnabel v. Trilegant Corp., 697

F.3d 110, 118-119 (2d Cir. 2012). On appeal from a denial of a motion to compel

arbitration, this Court must accept all factual allegations in a plaintiff’s complaint

as true. Id. at 113. “Allegations related to the question of whether the parties

formed a valid arbitration agreement – a question the district court answered in the

negative – are evaluated to determine whether they raise a genuine issue of

material fact that must be resolved by a fact-finder at trial.” Id. “If there is an

issue of fact as to the making of the agreement for arbitration, then a trial is

necessary.” Id. (citation omitted).


- 18 -

In this case, the District Court determined that Plaintiffs alleged “that the

tribal law and the tribal court system have been corrupted by large investors from

outside the reservation. The claim is plausible for the purposes of federal pleading

standards since Plaintiffs have alleged a variety of facts which bring into question

the independence and objectivity of the tribal legal system.” SPA31-32.

Defendants contested a number of the facts alleged in the Complaint by submitting

declarations. For example, Defendants contested the issue of personal jurisdiction

by filing declarations from each of the Tribal Defendants. However, Defendants

elected not to contest the facts concerning the fraud associated with the Purported

Arbitration Agreement. As a result, this Court must accept those facts as true.

Schnabel, 697 F.3d at 113.

Finally, the District Court’s decision to order discovery is reviewed for an

abuse of discretion. First City, N.A. v. Rafidain Bank, 150 F.3d 172, 175 (2d Cir.

1998).

SUMMARY OF ARGUMENT

This case arises out of a massive fraud that was perpetrated by Defendants to

engage in a predatory consumer lending scheme that violates both state and federal

law. When Defendants created this illegal enterprise, they attempted to establish a

labyrinthine system of protection that would cloak their scheme in the mantle of


- 19 -

tribal immunity and shield their illegal conduct from federal judicial review.

However, Defendants miscalculated.

Tribal immunity does not apply in this case. Defendants attempted to

purchase the Chippewa Cree’s tribal immunity to engage in unlawful lending

practices and insulate themselves from legal liability. But one of the fundamental

principles of sovereignty is that it is not a commodity that can be bought and sold.

In addition, the United States Supreme Court has held that state law may be

enforced against tribal officials through official capacity actions even when

sovereign immunity legitimately exists.

Defendants also cannot hide behind their Purported Arbitration Agreement.

The Agreement is unenforceable because it is riddled with unconscionable terms

and was fraudulently created by Defendants. The Agreement requires the

application of Chippewa Cree law, but Rees and Think Finance purchased and

wrote this “law.” The Purported Arbitration Agreement prevents federal court

review by directing all claims – either through review of arbitration awards or

through a sham “opt-out” process – to the Chippewa Cree Tribal Judiciary, a non-

functioning legal entity that has been improperly influenced by Defendants. A

joint investigation by the FBI and the Department of Interior found that a tribal

judge was so intimidated by Defendants’ machinations that the tribal judge ignored


- 20 -

the Chippewa Cree Constitution and authorized the illegal and unconstitutional

removal of the Tribe’s elected Chairman.

In the end, neither tribal immunity nor the Purported Arbitration Agreement

can prevent a federal court from addressing the Defendants’ illegal behavior. This

Court should affirm the District Court’s decision and allow discovery to proceed in

this case.

ARGUMENT

I. TRIBAL IMMUNITY DOES NOT BAR THIS ACTION.

A. The Tribal Defendants Concede That Ms. Given’s EFTA Claim Is

Viable.

Tribal immunity – even the broad version urged by the Tribal Defendants –

will not end this suit. The Tribal Defendants concede that Ex parte Young “applies

only where a plaintiff sues a state or tribal official, in his or her official capacity,

for prospective relief from a violation of federal law.” TD Br. at 16 (emphasis in

original). The Electronic Funds Transfer Act, 15 U.S.C. §1693m (“EFTA”), is a

federal statute. The District Court held that Ms. Given stated a claim under the

EFTA, SPA44-47, and the Tribal Defendants concede that they are not separately

challenging this claim.1 TD Br. at 29 n.5. Therefore, Plaintiffs may seek

1 The Tribal Defendants do not and cannot challenge the EFTA claim in this

appeal. The District Court denied the Tribal Defendants’ motion to certify its


- 21 -

prospective relief for a violation of the EFTA. Because Ms. Given has a

continuing claim for prospective relief against the Tribal Defendants, this Court

should return the case to the District Court to proceed with discovery.

B. Tribal Immunity Does Not Extend To Plain Green Or Its Officers

Because Plain Green Is A Fraud.

1. Plaintiffs Have Never Conceded That Plain Green Or Its

Officers Are Entitled To Tribal Immunity.

Defendants base all of their arguments on the incorrect premise that Plain

Green is a legitimate enterprise and can be recognized as an arm of the Tribe, but

Plain Green is a fraud. Doc. 85 at 2-4, 17-18, 102-105, 112-116.2 Plaintiffs have

never “conceded” that Plain Green or its officers are entitled to tribal immunity

because they are “an ‘arm’ of the Tribe.” Compare id. at 27-28 with Tribal

Defendants’ Brief (“TD Br.”) at 16 n.3.3 The Tribal Defendants have always

understood that Plaintiffs’ argument is that tribal immunity is not a commodity that

can be bought and sold and extended to fraudulent enterprises. Doc. 92 at 1

(describing Plaintiffs’ argument as “the Tribe ‘sold’ its sovereignty to Think

order for interlocutory appeal. Doc. 173. It also denied a separate motion to

certify an appeal on the issue of personal jurisdiction. Id.

2 Defendants ignore the facts alleged in the Amended Complaint, which this

Court must accept as true. See, e.g., A36, ¶37, A43-47, ¶¶76-99, A67, ¶208.

3 The District Court did not reach the arguments about Plain Green not being

an arm of the tribe. See SPA13 n.12. Instead, the District Court offered a narrow

ruling based on Michigan v. Bay Mills Indian Cmty., 134 S.Ct. 2024 (2014). SPA7-

13.


- 22 -

Finance during the formation of Plain Green [See, e.g., Opp’n at 27]”)(citation in

original).

In the Opposition to the Motions to Dismiss, Plaintiffs raised three

arguments concerning the threshold question of whether tribal immunity exists in

this case. Doc. 85 at 27-28. First, the idea of selling sovereignty is inconsistent

with the concept of sovereign immunity. The Supreme Court has held that

sovereign immunity does not exist when the sovereign becomes a shareholder in a

company. Bank of United States v. Planter’s Bank of Georgia, 22 U.S. 904, 907

(1824). This is true even when the sovereign is a 100% shareholder. Southern Ry.

Co. v. North Carolina Ry. Co., 81 F. 595, 599-600 (1897). Sovereignty has never

been a commodity that can be purchased. But that is exactly what Think Finance

and Kenneth Rees did when they entered into the Term Sheet with the Tribal

Defendants. Id. In exchange for less than 5% of the revenues of the Plain Green

enterprise, Rees and Think Finance purchased the right to make sovereign

immunity arguments whenever their criminal conduct was challenged. As this

Court has said in Otoe, “a tribe has no legitimate interest in selling an opportunity

to evade state law.” Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Fin.

Serv., 769 F.3d 105, 114 (2d Cir. 2014).

Second, and independently, in order for an assertion of sovereign immunity

to be legitimate, “self-government and sovereign and independent authority” must


- 23 -

be “left in the administration of the state.” Worchester v. Georgia, 31 U.S. 515,

561 (1831). That independence does not exist in this case because Plain Green is a

fraud. Rees and Think Finance – not the Tribe – have control over Plain Green.

See, e.g., A43, ¶80, A48, ¶101. The Term Sheet shows that Rees and Think

Finance controlled the creation of Plain Green. A73-76. Think Finance and other

outside parties receive more than 95% of the revenue from the Plain Green

enterprise and actually control its operations. A33, ¶23. The affidavit of Neal

Rosette shows that when the profitability of Think Finance was threatened, Think

Finance ordered the Tribe to fire its elected Chairman. A88, ¶¶9-10. And a former

Chippewa Cree tribal judge has told the Office of the Inspector General for the

Department of the Interior that he entered an order removing St. Marks, even

though the judge thought it was improper and unconstitutional, because he feared

retaliation. A279, ¶9; A280-85. This Court should not extend tribal immunity to

an entity that is controlled by unrelated third parties seeking to circumvent state

and federal law.

Third, if there is any factual question about the sale of sovereignty or other

immunity-related issues, this Court should remand this matter to the District Court

for jurisdictional discovery to uncover more facts. Rafidain Bank, 150 F.3d at 176-

77. While Plaintiffs have already presented facts to the District Court that detail


- 24 -

the fraudulent scheme, additional discovery would further illuminate exactly how

the Tribe sold its sovereignty.

Kiowa Tribe of Oklahoma v. Manufacturing Techs., Inc., 523 U.S. 751, 753

(1998), does not undermine these arguments. In Kiowa, a tribe purchased stock

from a company and refused to pay off the promissory note associated with this

purchase. The company sued the tribe for breach of contract. The Supreme Court

held that tribal immunity applied and the company could not pursue the breach of

contract action. However, Kiowa is distinguishable from this case. Kiowa did not

involve a situation where a tribe sold its tribal immunity to unrelated third parties

so they could evade state and federal law and perpetrate a massive fraud.

Moreover, Kiowa did not address the availability of injunctive relief in the tribal

immunity context.

2. This Court May Ignore Corporate Forms When Considering

Tribal Immunity.

The Supreme Court has held that courts may ignore the corporate form when

acknowledging it would work an injustice or a fraud. In Anderson v. Abbott, the

Supreme Court noted that while “[l]imited liability is the rule, not the exception,”

“there are occasions when the limited liability sought to be obtained through the

corporation will be qualified or denied.” 321 U.S. 349, 362 (1944); see also Doc.

85 at 96-97 (citing Anderson, 321 U.S. at 362). “Mr. Justice Cardozo stated that a

surrender of that principle of limited liability would be made when the sacrifice is


- 25 -

essential to the end that some accepted public policy may be defended or upheld.”

Id.(internal citations omitted). Fraud is one of the occasions when limited liability

should be ignored. Id.

In this case, Plain Green’s corporate form should be ignored because

recognizing the form would work a fraud. Rees and Think Finance control the

affairs of Plain Green and reap the economic benefits from Plain Green’s

operations. They should not be allowed to use the corporate structure of Plain

Green to evade state and federal law.

The authority that the Tribal Defendants cite in a footnote about an “arm” of

the tribe actually supports Plaintiffs’ argument. See TD Br. at 16 n.3. In Allen v.

Gold Country Casino, the Ninth Circuit affirmed the dismissal of an employee’s

claim against a casino because the casino was an arm of the tribe and entitled to

tribal immunity. However, the Ninth Circuit reversed the dismissal of claims

brought against individuals and remanded the case to allow the plaintiff to amend

his complaint. The Ninth Circuit justified its decision by pointing to the fact that

the money generated by the casino stayed with the tribe. “One of the principal

purposes of the [Indian Gaming Regulatory Act] is ‘to insure that the Indian tribe

is the primary beneficiary of the gaming operation.’” 464 F.3d 1044, 1046 (9th Cir.

2006). “With the tribe owning and operating the Casino, there is no question that

these economic and other advantages inure to the benefit of the Tribe.” Id. at


- 26 -

1047. “In light of the purposes for which the Tribe founded this Casino and the

Tribe’s ownership and control of its operations, there can be little doubt that the

Casino functions as an arm of the Tribe.” Id. However, in this case, the structure

of Plain Green not only allowed the business to operate off tribal land by making

loans to individuals throughout the country, but it allowed more than 95% of the

profits to go to outside parties. In addition, Rees and Think Finance created and

exercised control over Plain Green. Here, the creation and operation of Plain

Green actually demeaned the tribal sovereignty that the Gold Country decision

aimed to protect.4

C. Tribal Officials Are Subject To Official Capacity Actions Based On

Violations Of State Law.

Defendants ignore the fundamental purpose of official capacity actions when

they argue that such actions do not allow the enforcement of state law against

tribes by private plaintiffs. At its core, Ex parte Young is a case about

responsibility and compliance with the law. 209 U.S. 123 (1907). Faced with the

problem of states asserting sovereign immunity to prevent enforcement of

Constitutional guarantees, the Supreme Court developed a legal fiction that

allowed the Constitution to be enforced against states. Following its previous

4 The other case that the Tribal Defendants cite in footnote 3, Will v.

Michigan Dep’t of State Police, only mentions “arms of the state” in passing. 491

U.S. 58, 70 (1988). It did not deal with the question of whether tribal immunity

exists when the “arm of the state” is alleged to be a fraud.


- 27 -

decisions that required sovereigns to be held accountable for their actions, the

Supreme Court recently confirmed that officers of Native American tribes can be

sued under the doctrine of Ex parte Young and must not only comply with federal

law but also state law. Bay Mills, 134 S.Ct. at 2035. As a result, Plaintiffs can

maintain an official capacity action against the officers of Plain Green to require

them to comply with both federal and state law.

1. State Law Can Be Enforced Through Official Capacity Actions.

Both Supreme Court and Second Circuit law allow courts to enjoin a tribe’s

off-reservation activity based on violations of state law. In discussing whether a

tribe could set up a casino in Michigan in violation of state law, the Supreme Court

stated that “tribal immunity does not bar such a suit for injunctive relief against

individuals, including tribal officers, responsible for unlawful conduct.” Bay Mills,

134 S. Ct. at 2035 (emphasis in original). To the contrary, the Supreme Court held

that Michigan has a “panoply” of civil and criminal state law tools it could use to

“shutter, quickly and permanently, an illegal casino.” Id. In the Supreme Court’s

view, the state’s power to enforce state law was “capacious.” Id. at 2034.

The Second Circuit recently confirmed the obligation of Native American

payday lenders to comply with state law. “Native Americans ‘going beyond the

reservation boundaries’ must comply with state laws as long as those laws are

‘non-discriminatory [and] . . . otherwise applicable to all citizens of [that] State.”


- 28 -

Otoe-Missouria, 769 F.3d at 113 (citing Mescalero Apache Tribe v. Jones, 411

U.S. 145, 148-49 (1973)); see also Nevada v. Hicks, 533 U.S. 353, 362 (2001)

(“When, however, state interests outside the reservation are implicated, States may

regulate activities even of tribe members on tribal land, as exemplified by our

decision in Confederated Tribes.”). Here, the activities of the Plain Green

enterprise occurred outside the reservation, which triggered the Tribal Defendants’

obligation to comply with state law. Defendants have chosen not to challenge the

District Court’s factual findings on that issue. See SPA11-12.

The Tribal Defendants’ failure to mention Otoe is telling. Even though

Plaintiffs and the District Court relied on Otoe, the Tribal Defendants do not

discuss it. In that case, the Otoe-Missouria Tribe and Great Plains Lending, LLC

sought “an injunction to restrain and enjoin the State from purporting to pursue and

from actually pursuing any and all state regulatory and enforcement actions over

the Tribal Nations and Tribal Business. . . .” Cmplt. ¶59 in Otoe-Missouria Tribe

of Indians v. N.Y. State Dep’t of Fin. Servs., No. 1:13-cv-5930-RJS, Dkt# 1

(emphasis added). But this Court did not allow the tribe and its payday lending

company to evade New York state law by asserting tribal immunity. 769 F.3d at

109. The Otoe ruling is binding.


- 29 -

2. The District Court Did Not Wipe Away A Century of Ex parte

Young Precedent.

The Tribal Defendants engage in a bit of hyperbole when they claim that

“[i]n one fell swoop, the District Court wiped away a century of Ex parte Young

precedent.” TD Br. at 22. As the District Court noted, Bay Mills did not just

materialize from thin air. SPA11 n.10. There is a long line of cases supporting the

idea that state law is enforceable against tribal members. In the Puyallup Tribe

litigation, the Supreme Court repeatedly recognized the propriety of enjoining

individual tribal members for violations of state law. In Puyallup I, the Court held

that “a suit to enjoin violations of state law by individual tribal members” should

continue. Puyallup Tribe v. Dep’t of Game, 391 U.S. 392, 396 n.11 (1968). In

Puyallup III, the Court again held that “whether or not the Tribe itself may be sued

in state court without its consent or that of Congress, a suit to enjoin violations of

state law by individual tribal members is permissible.” Puyallup Tribe, Inc. v.

Dep’t of Game, 433 U.S. 165, 171-72 (1977). The next term, the Supreme Court

relied on Puyallup III and Ex parte Young to state that: “As an officer of the

Pueblo, petitioner Lucario Padilla is not protected by the tribe’s immunity from

suit.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978). In Oklahoma Tax

Comm’n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505 (1991), a case

involving the collection of state taxes, the Court continued to recognize the

propriety of an official capacity suit. In the majority opinion, the Supreme Court


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stated that “[w]e have never held that individual agents or officers of a tribe are not

liable for damages in actions brought by the State.” Id. at 514 (citing Ex parte

Young, 209 U.S. 123 (1908)). Justice Stevens’s concurrence noted the potential

availability of “claims for prospective equitable relief.” 498 U.S. at 515. As a

result, the Tribal Defendants’ assertion that Bay Mills “would overturn decades of

settled Supreme Court holding” is incorrect. See TD Br. at 23.

The Tribal Defendants cite only two district court cases, Frazier and

Warren, to support their position, but both of those cases were decided before Bay

Mills and Otoe. The District Court correctly concluded that Bay Mills supplanted

Frazier. SPA10. Warren relies exclusively on Frazier for the proposition that

state law cannot be enforced against tribal officials. Warren v. United States, 859

F. Supp. 2d 522, 543 (W.D.N.Y. 2012) (citing Frazier v. Turning Stone Casino,

254 F. Supp. 2d 295, 310 (N.D.N.Y. 2003)). Neither case correctly states the law.

The Tribal Defendants also incorrectly claim that “[n]o federal court

decision, before the misguided one below, has permitted private plaintiffs to sue

tribal officials for violations of state law.” TD Br. at 16. The Fifth Circuit has

permitted private plaintiffs to sue tribal officials for violations of state law. In

Comstock Oil & Gas v. Alabama & Coushatta Indian Tribes, 261 F.3d 567, 570

(5th Cir. 2001), the Fifth Circuit held that “[t]he district court correctly concluded

that the tribal council members were not entitled to tribal sovereign immunity


- 31 -

because, in the Fifth Circuit, tribal officials are not immune from suits for

declaratory and injunctive relief.” Comstock involved the enforcement of various

oil and gas leases under both federal and state law. While two of these leases were

executed by the Bureau of Indian Affairs, seven were executed by the State of

Texas under Texas state law. Id. at 569 (“The State of Texas executed the

remaining seven leases before the effective date of the Alabama and Coushatta

Indian Tribes of Texas Restoration Act, and the BIA approved them.”); see also

1986 Oil and Gas Leases in Comstock Oil v. Ala. & Coushatta Indian Tribes, No.

9:98-cv-266-TH, Dkt # 153-2 (E.D.Tex. 1999). After determining that tribal

immunity did not apply, the Fifth Circuit remanded the case to the district court so

the plaintiffs could pursue their claims under state and federal law. Comstock, 261

F.3d at 575.

Comstock relied on an earlier Fifth Circuit case, TTEA v. Ysleta Del Sur

Pueblo, 181 F.3d 676, 680 (5th Cir. 1999). TTEA analyzed all of the relevant

precedents and concluded that relief was available against tribal officials in official

capacity actions:

The distinction between a suit for damages and one for

declaratory or injunctive relief is eminently sensible, and

nothing in Kiowa undermines the relevant logic. State

sovereign immunity does not preclude declaratory or

injunctive relief against state officials. See Ex Parte

Young, 209 U.S. 123 (1908). There is no reason that the

federal common law doctrine of tribal immunity, a

distinct but similar concept, should extend further than


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the now-constitutionalized doctrine of state sovereign

immunity.

Id.

3. Pennhurst Does Not Address Tribal Official Capacity Actions.

The Tribal Defendants cite Pennhurst State School & Hospital v.

Halderman, 465 U.S. 89 (1984), for the proposition that “a federal court may not

order state officials to conform their conduct to state law.” TD Br. at 18. While

this proposition is true for Ex parte Young actions, it is not true for Bay Mills

official capacity actions. Bay Mills did not overturn Pennhurst because Bay Mills

and Pennhurst addressed different questions.

The only circuit court of appeals to address the issue agrees. In Alabama v.

PCI Gaming Auth., 801 F.3d 1278, 1290 (11th Cir. 2015), the Eleventh Circuit

acknowledged the holding in Pennhurst, but distinguished Pennhurst from the

situation in Bay Mills. The Eleventh Circuit held that “tribal officials may be

subject to suit in federal court for violations of state law under the fiction of Ex

parte Young when their conduct occurs outside of Indian lands.” Id. (citing Bay

Mills, 134 S. Ct. at 2034-35).

The Tribal Defendants’ attempt to distinguish PCI Gaming fails because

they selectively quote Pennhurst and miss the critical point. TD Br. at 19. In

Pennhurst, the Supreme Court held that a plaintiff could not pursue an action

against state officials for violations of state law because the plaintiff’s action did


- 33 -

not implicate competing sovereign interests. In Ex parte Young, the Court allowed

a plaintiff to bring an action in federal court because state officials were ignoring

federal law. However, in Pennhurst, the Court held that these types of competing

interests were not present. Pennhurst, 465 U.S. at 105-06. The Court noted that

there was no “need to reconcile competing interests” “when a plaintiff alleges that

a state official has violated state law.” Pennhurst, 465 U.S. at 106 (emphasis in

original). In cases involving the enforcement of a state’s law against the state

itself, “the entire basis for the doctrine of Young and Edelman disappears.”

Pennhurst, 465 U.S. at 106.

This case is distinguishable from Pennhurst because there are several

competing sovereign interests. The first and most obvious conflict is between

Plain Green, a tribal limited liability company, and Vermont, a state that has

established clear laws for lending inside its borders. The second conflict is

between Plain Green and the federal government, which has enacted RICO to

prevent fraudulent loan sharking enterprises. The third and more subtle conflict is

between the state and the federal government. As Pennhurst recognized, a state

has a strong interest in enforcing its own laws when they do not conflict with

federal law. A state’s sovereign interests are infringed when federal courts refuse

to enforce state laws of general applicability for violations by tribal officials that

occur off of the reservation. As demonstrated by the briefing in Bay Mills, the


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inability to enforce state law creates conflicts between the state and the federal

government. See infra at 34-37.

4. Bay Mills’s State Enforcement Discussion Is Not Dicta.

The Tribal Defendants argue that this Court should ignore Bay Mills because

its statement that tribal officials can be sued in their official capacities is nothing

more than dicta. The Tribal Defendants contend that the “hypothetical state-law

suit was not argued by the parties, briefed to the Court, or decided as a necessary

component of the Court’s holding.” TD Br. at 23. The Tribal Defendants are

wrong. The issue of whether injunctive relief was available against tribal officials

in their official capacity for violations of state law was explicitly briefed and

argued in Bay Mills. After analyzing the issue, the Supreme Court held that

injunctive relief is available.

a. The parties in Bay Mills briefed the issue of whether state

law could be enforced through official capacity actions.

The briefing before the Supreme Court in Bay Mills addressed enforcement

of state law against tribal officials. The appendix to the Petition for Certiorari

included the amended complaint that brought claims against tribal officers in their

official capacity for violations of state law. Pet. App. 55a, Bay Mills, 134 S.Ct.

2024 (No.12-515) (Oct. 23, 2012). When the Solicitor General discovered this

amended complaint, which was pursuing an Ex parte Young action, he urged the

Supreme Court not to take the case because of the pendency of the official capacity


- 35 -

action to enforce state law. U.S. Cert. Br. at 21, Bay Mills, 134 S.Ct. 2024 (No.12-

515), 2013 U.S. S.Ct. Briefs LEXIS 2370, *35-36 (May 14, 2013). Michigan

opposed the certiorari brief filed by the United States and argued that an official

capacity suit was insufficient to protect its state interests. Michigan Supp. Cert. Br.

at 8, Bay Mills, 134 S.Ct. 2024 (No.12-515), 2013 U.S. S.Ct. Briefs LEXIS 2529,

*12-13 (May 24, 2013).

The discussion about the availability of official capacity actions continued in

the merits briefing. Bay Mills’s counsel, who is also Counsel of Record for the

Tribal Defendants in this appeal, suggested that official capacity actions against

tribal officials were available. Resp. Br. at 19, Bay Mills, 134 S.Ct. 2024 (No.12-

515), 2013 U.S. S. Ct. Briefs LEXIS 4324, *36 (Oct. 24, 2013). Counsel did this

to assuage the Supreme Court’s concern that Michigan had no alternative to

prevent violations of Michigan law for off-reservation activity. “Michigan and

other states also have a wide range of other dispute resolution mechanisms at their

disposal, from negotiated waivers of sovereign immunity to Ex parte Young suits

against tribal officials.” Id.; see also id. at 37, 2013 U.S. S.Ct. Briefs LEXIS 4324

at *62 (“But that decision simply misapplied Ex parte Young, which permits suits

against state officers but not state governments”). Counsel argued that allowing

injunctive relief actions against officials would respect tribal immunity:

For instance, [Michigan] may be able to file an Ex parte

Young-type suit against tribal officials to enjoin them


- 36 -

from violating the law. See Santa Clara Pueblo, 436 U.S.

at 59. In the context of state sovereign immunity, the Ex

parte Young doctrine provides a remedy for ongoing

unlawful conduct by a governmental official where

immunity would otherwise prevent enforcement of the

law. See Virginia Office for Protection & Advocacy v.

Stewart, 131 S. Ct. 1632, 1638 (2011). Parallel suits

against tribal officers have the advantage of enabling

states like Michigan to halt unlawful conduct while still

respecting tribal sovereignty.

Id. at 55; 2013 U.S. S.Ct. Briefs LEXIS 4324 at *89.

In their brief here, the Tribal Defendants also make the unusual claim that

the Supreme Court made “an error” in Bay Mills when it announced that official

capacity actions were available against tribal officials for violations of state law.

TD Br. at 24. Ironically, the Supreme Court chose its words based on the words of

Bay Mills’s counsel:

As this Court has stated before, analogizing to Ex parte

Young, [], tribal immunity does not bar such a suit for

injunctive relief against individuals, including tribal

officers, responsible for unlawful conduct. See Santa

Clara Pueblo, 436 U.S. at 59, [].

Bay Mills, 134 S. Ct. at 2035. The Court’s choice of words in Bay Mills was

intentional – not an error.

The Tribal Defendants also mistakenly assert that the parties “never argued

that a plaintiff might bring an Ex parte Young-type suit against tribal officials in

their official capacity for violations of state law.” TD Br. at 26. Yet, in the pages

of the brief of the United States that precede the page cited by the Tribal


- 37 -

Defendants, the United States makes exactly that argument. “[I]njunctive or

declaratory relief may also be available against the officers of either party. In that

respect, Counts IV-VI in petitioner’s amended complaint, raising claims under

federal common law and state law, remain pending in the district court against

respondent’s Tribal Gaming Commission, the Commission’s members, and the

member of respondent’s Executive Council.” U.S. Br. at 31-32, Bay Mills, 134

S.Ct. 2024 (No.12-515), 2013 U.S. S.Ct. Briefs LEXIS 4384 at *52-53 (October

31, 2013) (emphasis added).

b. The Bay Mills Court’s statements about official capacity

actions for violations of state law were essential to its

holding.

When the Bay Mills Court considered whether Michigan could bring an

action for violations of state law against tribal officials, it was considering an issue

that was necessary to the outcome of the case. See, e.g., Seminole Tribe v. Florida,

517 U.S. 44, 67 (1996) (“When an opinion issues for the Court, it is not only the

result but also those portions of the opinion necessary to the result by which we are

bound.”). Specifically, the Court had to resolve whether the Indian Gaming

Regulatory Act (“IGRA”), 25 U.S.C. §2701 et seq., provided a claim to enjoin the

operation of a casino that was located off tribal land. The Court concluded that

under the IGRA, claims may only be brought for violations that occur on tribal

land. To reach that result, the Court consulted the history and design of the IGRA.


- 38 -

“IGRA’s history and design provide a more than intelligible answer to the question

Michigan poses about why Congress would have confined a State’s authority to

sue a tribe as §2710(d)(7)(A)(ii) does.” Bay Mills, 134 S. Ct. at 2034. Part of that

history was that States had other ways to enforce their laws: “Cabazon left fully

intact a State’s regulatory power over tribal gaming outside Indian territory –

which, as we will soon show, is capacious. . . So the problem Congress set out to

address in IGRA (Cabazon’s ouster of state authority) arose in Indian lands alone.”

Id. The Supreme Court was not concerned about Michigan’s inability to bring a

suit under the IGRA because it recognized that Michigan had the ability to bring an

action against tribal officials under its own state laws.5

c. Official capacity suits have always been available to

private parties.

The Tribal Defendants argue that even if states can bring official capacity

actions against tribal officials, this does not mean that private parties can bring this

type of suit. TD Br. at 27. However, this distinction is baseless. Official capacity

actions have always been available to private parties. In fact, stockholders in a

railroad brought the Ex parte Young case. Private parties also have repeatedly

brought official capacity actions against tribal defendants. See, e.g., Vann v.

5 The Supreme Court’s statement about the availability of official capacity

actions against tribal officials was also essential to its holding that there was

subject matter jurisdiction over the case. Michigan, 134 S.Ct. at 2029 n.2.


- 39 -

Department of Interior, 701 F.3d 927, 928 (D.C. Cir. 2012) (holding that

descendants of ex-slaves of the Cherokee can bring an official capacity action);

Salt River Project Agr. Improvement & Power Dist. v. Lee, 672 F.3d 1176, 1177

(9th Cir. 2012) (allowing Utah corporation to bring an official capacity action);

Comstock, 261 F.3d at 570. Finally, private parties play an important part in

implementing state policy and stopping corrupt behavior. States, like Vermont,

have limited resources and cannot pursue every violation of state law. Sometimes

they depend on private parties to enforce state law. See Amicus Brief of State of

Vermont, Doc.91 at 14 (“States do not have resources to pursue every illegal

online lender.”); see also 9 V.S.A. §2461 (authorizing the private enforcement of

the Vermont Consumer Fraud Act).

D. The Tribal Defendants’ Argument That RICO Does Not Substantively

Apply In This Case Is Incorrect.

1. The Court Has No Jurisdiction To Consider The Tribal

Defendants’ RICO Arguments.

In raising the issue of whether RICO applies to this case, the Tribal

Defendants are attempting to reach an issue that is not properly before this Court.

The Tribal Defendants sought to certify the District Court’s Order so that they

could contest all of the rulings that the District Court made. Doc. 135. However,

the District Court denied that motion. Doc. 173. The District Court did not grant

Defendants the right to an interlocutory appeal on the RICO claim, and the only


- 40 -

issues that Defendants have an automatic right to appeal are tribal immunity and

arbitrability. As a result, the Court has no jurisdiction to review the RICO issues.

Mathers v. Wright, 636 F.3d 396, 398-99 (8th Cir. 2010).

2. RICO Applies To The Tribal Defendants.

The Tribal Defendants argue that RICO does not substantively apply to

Native American tribes, but this is wrong. Congress enjoys plenary power to

legislate in the area of Native American affairs. United States v. Lara, 541 U.S.

193, 200 (2004). Accordingly, federal statutes of general applicability apply to

Native American tribes unless Congress specifically exempts them. “[I]t is now

well settled by many decisions of this Court that a general statute in terms applying

to all persons includes Indians and their property interests.” Federal Power

Comm’n v. Tuscarora Indian Nation, 362 U.S. 99, 116 (1960); United States v.

Winter, 237 F.3d 170, 173 (2d Cir. 2001) (holding that federal criminal currency

laws applied to Native Americans that ran racketeering enterprise); Reich v.

Mashantucket Sand & Gravel, 95 F.3d 174, 181 (2d Cir. 1996) (holding that

OSHA applied to construction company operated by tribe); Menominee v. Tribal

Enters. v. Solis, 601 F.3d 669, 670 (7th Cir. 2010) (holding that OSHA applied to

sawmill operated by tribe); San Manuel Indian Bingo & Casino v. NLRB, 475 F.3d

1306, 1311-15 (D.C. Cir. 2006) (holding that the NLRA applied to casino operated


- 41 -

by tribe). In addition, RICO was specifically created to address fraudulent

enterprises like the payday lending scheme in this case.

First, RICO creates a broad scope of liability. Section 1962(c) bars

racketeering and collection of unlawful debt by “any person.” 18 U.S.C. § 1962.

Section 1961(3) states that “‘person’ includes any individual or entity capable of

holding a legal or beneficial interest in property.” 18 U.S.C. § 1961(3). The broad

definition of “person” encompasses both Plain Green and its officers. See Federal

Power Comm’n, 362 U.S. at 116; see also County of Suffolk v. Long Island

Lighting Co., 907 F.2d 1295, 1305 (2d Cir. 1990) (holding that public utility was

“person” under RICO); Monell v. Department of Soc. Serv. of N.Y., 436 U.S. 658,

690 (1977) (holding that municipality was a person under Section 1983). The use

of “includes” and “any” shows that Congress meant to include governmental

entities within the definition of “person.” See United States v. Angelilli, 660 F.2d

23, 31 (2d Cir. 1981). Moreover, the absence of “tribe” or an equivalent term does

not mean that Congress did not sweep those entities into the broad definition of

“person.” See id. at 31 n.9. This Court’s review of the statute’s text and structure

in Angelilli led it to conclude: “We see no sign of an intention by Congress to

exclude governmental units from its scope.” Id. at 31. In that case, this Court’s

detailed examination of the legislative history only bolstered its conclusion about

the text: “Our interpretation of the language of the statute to extend to activities


- 42 -

affecting governmental entities is further supported by the purpose and legislative

history of the Organized Crime Control Act of 1970 . . .” Id. at 32.

Second, the remedial provisions of RICO were designed to cut through

legalistic formalities. “If the one-man band incorporates, it gets some legal

protections from the corporate form, such as limited liability; and it is just this sort

of legal shield for illegal activity that RICO tries to pierce.” McCullough v. Suter,

757 F.2d 142, 144 (7th Cir. 1985). For example, Section 1964 empowers district

courts to issue “appropriate orders, including but not limited to: ordering any

person to divest himself of any interest, direct or indirect, in any enterprise, . . . or

ordering the dissolution or reorganization of any enterprise, making due provision

for the rights of innocent persons.” 18 U.S.C. §1964(a). Section 1964(a) “is a

section that ‘grants district courts authority to hear RICO claims and then . . . spells

out a non-exclusive list of remedies district courts are empowered to provide in

such cases.” Chevron Corp. v. Donzinger, 833 F.3d 74, 138 (2d Cir.

2016)(internal citations omitted).

Third, illegal debt collection “is at the heart of the conduct targeted by the

RICO statute.” United States v. Minicone, 960 F.2d 1099, 1107 (2d Cir. 1992); see

also United States v. Turkette, 452 U.S. 576, 589-90 (1981) (stating that loan

sharking was “among the very crimes that Congress specifically found to be

typical of the crimes committed by organized crime”). The unlawful debt section


- 43 -

of RICO was specifically designed to target loan sharks. Durante Bros & Sons,

Inc. v. Flushing Nat’l Bank, 755 F.2d 239, 248 (2d Cir. 1985). In enacting RICO,

Congress intended to stop loan sharking “by establishing new penal prohibitions,

and by providing enhanced sanctions and new remedies to deal with the unlawful

activities of those engaged in organized crime.” Id. at 248 (quoting Organized

Crime Control Act, Pub. L. No. 91-452 (1970) (Statement of Findings and

Purpose)); see also United States v. Oreto, 37 F.3d 739, 750 (1st Cir. 1994)

(rejecting equal protection challenge to the unlawful collection of debt portion of

RICO and stating that “Congress’ statement of purposes . . . gives some reason to

believe that Congress” decided that collections of unlawful debt were central to

evils at which RICO was directed).

In arguing that RICO does not apply to Native American tribes, the Tribal

Defendants ignore everything that courts examine in interpreting the meaning of a

statute. RICO’s text, purpose, structure, and legislative history all support

applying it here. The facts of this case, which the Tribal Defendants completely

avoid, describe an illegal loan sharking enterprise that Defendants created to try to

evade state and federal law. Congress created RICO to shut down exactly this type

of illegal behavior.


- 44 -

3. The Tribal Defendants’ RICO Arguments Are Inconsistent With

The Supreme Court’s Understanding Of RICO And Municipal

Liability.

One of the arguments that the Tribal Defendants make in the section of their

brief that supposedly addresses tribal immunity is that RICO should not apply

because “governmental” entities cannot form the appropriate mens rea. TD Br. at

29. This argument is not only unrelated to the tribal immunity question before this

Court, but it is also wrong. The cases cited by the Tribal Defendants deal with

municipal liability, not tribal immunity. The principal concern in municipal

liability cases is that taxpayers will have to pay for the misdeeds of their municipal

representatives. Tribal immunity already addresses that issue, and to overlay the

jurisprudence of municipal liability will only confuse, rather than clarify, the law.

Moreover, the Supreme Court has repeatedly warned against reading into RICO

additional requirements not found in the text of the statute. See Sedima, S.P.R.L. v.

Imrex, Inc., 473 U.S. 479, 495 (1985) (“There is no room in the statutory language

for an additional, amorphous ‘racketeering injury’ requirement.”); United States v.

Turkette, 452 U.S. 576, 580 (1981).

The two cases that the Tribal Defendants cite where appellate courts

imported the concept of mens rea into RICO jurisprudence borrowed the concept

from a Section 1983 case, Newport v. Fact Concerts. See Genty v. Resolution Tr.

Corp., 937 F.2d 899, 910 (3d Cir. 1991) (citing Newport v. Fact Concerts, 453


- 45 -

U.S. 247, 260 (1991)); Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940

F.2d 397, 404 (9th Cir. 1991) (quoting Newport, 453 U.S. at 261-62). Newport’s

creation of a mens rea requirement was a reaction to Monell v. Department of

Social Services, 436 U.S. 658 (1977). Monell held that municipalities were subject

to liability under Section 1983: “Local governing bodies, therefore, can be sued

directly under §1983 for monetary, declaratory, or injunctive relief where, as here,

the action that is alleged to be unconstitutional implements or executes a policy

statement, ordinance, regulation, or decision officially adopted and promulgated by

the body’s officers.” Id. at 690. Section 1983 law merely prevents municipalities

from being held liable for punitive damages. Newport, 453 U.S. at 262-63. It does

not prevent municipalities from being held liable for their wrongdoing. Id. After

Newport, a plaintiff can still obtain injunctive relief, declaratory relief, and

attorney’s fees against a municipality. Id. However, the Tribal Defendants urge

this Court to adopt a mens rea requirement for the RICO statute that would not

only bar punitive damages, but would prevent the plaintiffs from obtaining any

type of relief, even injunctive and declaratory relief. That stretches the analogy to

Section 1983 law too far.

The Court should not draw an analogy between municipalities and the tribal

lending entity in this case for several additional reasons. First, the Court should

treat Plain Green as a business (rather than a municipality) when determining


- 46 -

whether it can form the requisite mens rea. In municipal liability cases, courts

recognize that artificial entities have the ability to form the requisite mens rea. See

Lancaster Cmty. Hosp., 940 F.2d at 404 (quoting Newport, 453 U.S. at 261-62);

Genty, 937 F.2d at 909 (“Courts long have held ordinary corporations civilly and

criminally liable for the malicious torts or crimes of their high officers, particularly

when the corporation benefits from the officers’ offensive conduct.”). Moreover,

in RICO cases, courts have repeatedly recognized that RICO applies to

government-run commercial enterprises. In United States v. Frumento, the Third

Circuit held that: “We refuse to believe that Congress had such ‘tunnel-vision’

when it enacted the racketeering statute or that it intended to exclude from the

protective embrace of this broad statute, designed to curb organized crime, state

operated commercial ventures engaged in interstate commerce, or other

governmental agencies regulating commercial and utility operations affecting

interstate commerce.” 563 F.2d 1083, 1091 (3d Cir. 1977); see also United States

v. Morrison, 686 F.3d 94 (2d Cir. 2012) (upholding RICO conviction of owner of

Native American smoke shop).6

Second, artificially restricting the class of Defendants under RICO runs

contrary to the text and purpose of RICO. One of RICO’s goals was to stop

6 The conviction was later vacated for jury misconduct. 580 Fed. Appx. 20

(2d Cir. 2014).


- 47 -

infiltration of governmental entities by organized crime. “Both the purpose and

legislative history of the Act reflect concern about the infiltration of local

government units.” De Falco v. Bernas, 244 F.3d 286, 307 (2d Cir. 2001)

(citations omitted); see also supra at 41-42. “Accordingly, the language of section

1961(4), defining enterprise, . . . unambiguously encompasses governmental units,

and . . . the purpose and history of the Act and the substance of RICO’s provisions

demonstrate a clear congressional intent that RICO be interpreted to apply to

activities that corrupt public or governmental entities.” Id. (internal citations

omitted); see also infra at 48-49.

Finally, imposing liability on a tribal lending entity does not raise concerns

about burdening taxpayers. In the cases refusing to hold municipalities liable for

their conduct, the underlying concern is that taxpayers will ultimately have to pay

for the municipality’s misconduct. The rationale in Lancaster was that the

perpetrator of the RICO fraud, the “body politic,” was also the victim. 940 F.2d at

404-405. “As a result, the “body politic” was not even aware of any dishonest

activities, and plainly lacked the specific intent to deceive which is an element of

mail fraud.” Id. But the concern in Lancaster is not present here. The victim of

the illegal Plain Green loan scheme is not the “body politic” of the Tribe, but

financially vulnerable people who are not members of the Tribe. More

importantly, Plaintiffs’ claims against the Tribal Defendants are only for


- 48 -

prospective injunctive relief. The money that was illegally taken from Plaintiffs,

more than 95% of which never went to the Tribe, can be recovered from the non-

tribal architects of the scheme and the Silicon Valley venture capital firms that

profited from the illegal enterprise.

4. RICO Does Not Protect Individuals Acting In Their Official

Capacity.

The Tribal Defendants argue that the mens rea requirement that originated

under Section 1983 should not only apply to municipalities under RICO, but also

to individuals acting in their official capacity. TD Br. at 30. Once again, this

represents a fundamental misunderstanding of Section 1983 law. In reaching its

conclusion that punitive damages were not available against a municipality, the

Newport court relied on the fact that plaintiffs could still recover punitive damages

against individual officials. “By allowing juries and courts to assess punitive

damages in appropriate circumstances against the offending official, based on his

personal financial resources, the statute directly advances the public’s interest in

preventing repeated constitutional deprivations.” Newport, 453 U.S. at 269.

Indeed, the entire inquiry in Newport proceeded after the jury found that the

individual officials had the required mental state for an award of punitive damages.

See id. at 253 (discussing award of punitive damages against municipal officials).

Again, there are significant reasons to believe that Congress took a harder

line against individuals acting in their official capacity when it enacted RICO than


- 49 -

when it enacted Section 1983. Rather than drawing an artificial distinction

between officials acting in their official and personal capacity, RICO targeted

corruption in the execution of official governmental duties. In Angelilli, this Court

noted that some of the predicate acts under RICO, like bribery and obstruction of

justice, were crimes involving the execution of official duties. 660 F.2d at 31-32.

It also reviewed legislative history that showed Congress was focused on the

actions of individuals acting in their official capacity. See e.g., id. at 33 (“Corrupt

officials and bribed law enforcement officers operate a “silent conspiracy’ in

support of organized crime.”); see also DeFalco, 244 F.3d at 308.

Courts have also recognized that RICO was aimed at officials who were

acting in their official capacity. The Supreme Court has held: “[T]he appellate

court’s critical legal distinction – between employees acting within the scope of

corporate authority and those acting outside that authority – is inconsistent with a

basic statutory purpose. . . . It would immunize from RICO liability many of those

at whom this Court has said RICO directly aims – e.g. high-ranking individuals in

an illegitimate criminal enterprise, who, seeking to further purposes of that

enterprise, act within the scope of their authority.” Cedric Kushner Promotions,

Ltd. v. King, 533 U.S. 158, 165 (2001). Several other courts of appeals have also

decided RICO cases involving individuals acting in their official capacity. See

Warner, 498 F.3d at 697 (holding misuse of official position represented predicate


- 50 -

act); United States v. Garner, 837 F.2d 1404, 1417 n.10 (7th Cir. 1987) (holding

that Illinois statutory offense that dealt with misconduct done “in his official

capacity” could be predicate act under RICO). Rather than exempting individuals

acting in their official capacity, RICO targets individuals who abuse their official

capacity to commit crimes. When Congress passed RICO, it was frustrated with

organized crime’s use of legal technicalities to avoid responsibility. To combat

this problem, it authorized a wide range of remedies, which are available in this

case.

In an attempt to side step the language and purpose of RICO, the Tribal

Defendants cite a gaggle of district court cases. TD Br. at 31. But these district

court cases fail to appreciate previous decisions of the Supreme Court and courts of

appeals. Despite the statements that were made in the cases cited by the Tribal

Defendants, the Southern District of New York originally recognized that RICO

applied to individuals acting in their official capacity. See In re Citisource, Inc.

Sec. Litig., 694 F. Supp. 1069, 1080 (S.D.N.Y. 1988) (citing Anderson-Myers Co.

v. Roach, 666 F. Supp. 106, 112-113 (D. Kan. 1987) (rejecting argument that

RICO does not apply to persons acting in their official capacity)). Somewhere

along the way, this message was lost. 7

7 Frooks v. Town of Cortland, 997 F. Supp. 438, 457 (S.D.N.Y. 1998)

improperly extended Gentry and Newport by relying on Rini v. Zwirn, 886 F. Supp.

270, 295 (S.D.N.Y. 1995), which incorrectly assumed that if the mens rea of an


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Finally, the unpublished decision, Rogers v. City of New York, 359 Fed.

App’x 201 (2d Cir. 2009), does not support the Tribal Defendants’ position. The

pro se litigant did not address the mens rea issue in her brief to the Court.

Appellant Br., Rogers v. City of New York, 359 Fed. App’x 201 (2d Cir. 2009).

5. Garcia Only Addressed On-Reservation Activity.

Garcia does not prevent the application of RICO in this case. Garcia

involved a claim of employment discrimination that occurred on the reservation.

Garcia v. Akwesasne Hous. Auth., 268 F.3d 76, 78 (2d Cir. 2001). In this case, as

the District Court found, the activity occurred off the reservation and involved

individuals who are not members of the Tribe. See supra at 27-28. In addition,

even if Garcia’s holding somehow applied to activity that occurred off the

reservation – and there is no reason to think that it did – then Bay Mills and Otoe

overruled it.

6. The District Court Did Not Abuse Its Discretion In Granting

Discovery.

There is no doubt that Plain Green officials have committed criminal acts

that have undermined the administration of justice. A298-314; Plea Agreement in

United States v. Morsette, No. 4:15-cr-61 (D.Mont. Nov. 12, 2015) (“Morsette

agent could not be attributed to a municipality, then the agent herself could not

have mens rea. Newport expressly recognizes that officers of a municipality can

act with mens rea and that this can provide the basis for an award of punitive

damages. Newport, 453 U.S. at 269.


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Plea”); Plea Agreement in United States v. Rosette, No. 4:15-cr-61 (D. Mont. Nov.

16, 2015) (“Rosette Plea”). Since the filing of the Complaint, Plaintiffs have

uncovered additional predicate acts under RICO that tribal officials have

committed. The District Court granted Plaintiffs discovery to understand these

facts and identify the perpetrators of this wrongdoing. SPA 63-64 (“The Court will

also permit Plaintiffs to discover facts related to the “additional allegations.”); see

also SPA25. Regardless of the outcome of this appeal, the Court should remand

the case so that Plaintiffs can conduct discovery and assert claims against various

individuals in their individual capacity.

While the tribal immunity issue may appear like a complicated web, it is

important to remember that Defendants intentionally wove this gossamer trap to try

to evade state and federal law. The payday lenders and Silicon Valley venture

capital firms that profited from the illegal loan sharking scheme thought that tribal

immunity would shield their illegal behavior, but they were wrong. Tribal

immunity is not something that can be purchased and used to cloak egregious

behavior. The Supreme Court has made it clear that injunctive relief is available

against tribal officials acting in their official capacity. And Defendants cannot

escape RICO, which was specifically designed to shut down fraudulent, corrupt

organizations that infiltrate government entities.


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II. THIS COURT SHOULD NOT ENFORCE THE ARBITRATION

AGREEMENT BECAUSE IT IS UNCONSCIONABLE AND

FRAUDULENT.

In creating the fraudulent Plain Green enterprise, Defendants did not stop

after they erected what they thought was an impenetrable tribal immunity barrier.

They also constructed an elaborate Agreement that was designed to act as another

layer of protection and guarantee that any outcome would be in Defendants’ favor.

They dictated the terms of the financial code that would govern any arbitration and

ensured that any arbitration dispute would ultimately be decided by a tribal

judiciary that they could intimidate and control. But once again, Defendants

miscalculated. An arbitration agreement cannot be used as a tool in a fraudulent

scheme to guarantee an outcome for the fraudulent enterprise. The Purported

Arbitration Agreement and Delegation Clause are unenforceable because they are

both unconscionable and fraudulent.

A. The Plain Language Of The Purported Arbitration Agreement Does

Not Cover This Dispute.

Ironically, when Defendants created the Purported Arbitration Agreement in

an effort to shield their fraudulent behavior from review, they drafted an agreement

that specifically bars an arbitrator from ruling on this case. The plain language of

the Purported Arbitration Agreement excludes arbitrator review of anything other

than “individual Disputes”: “parties agree that the arbitrator has no authority to

conduct class-wide proceedings and will be restricted to resolving the individual


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Disputes between the parties.” A265. Because this is a class action case, the

arbitrator cannot resolve this dispute. SPA31.

B. The Delegation Clause And The Purported Arbitration Agreement Are

Unenforceable.

The Court should not compel arbitration in this case because the Purported

Arbitration Agreement and the Delegation Clause are revocable under Section 2 of

the Federal Arbitration Act (“FAA”). The FAA provides that arbitration

agreements are unenforceable when a reason exists “at law or in equity for the

revocation of any contract.” 9 U.S.C. §2. “This savings clause [9 U.S.C. §2]

permits agreements to arbitrate to be invalidated by ‘generally applicable contract

defenses, fraud, duress, or unconscionability,’ but not defenses that apply only to

arbitration or that derive their meaning from the fact that an agreement to arbitrate

is at issue.” AT&T Mobility v. Concepcion, 131 S.Ct. 1740, 1746 (2010); see also,

e.g., Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 921 (9th Cir. 2013) (“Like

other contracts, arbitration agreements can be invalidated for fraud, duress, or

unconscionability.”); Ryan v. Delbert Servs. Corp., No. 5:15-cv-5044, 2016 U.S.

Dist. LEXIS 121246, *9 (E.D. Pa. Sept. 8, 2016) (invalidating delegation clause in

tribal lending agreement under 9 U.S.C. §2). “If a party challenges the validity

under §2 of the precise agreement to arbitrate at issue, the federal court must

consider the challenge before ordering compliance with that agreement under §4.”

Rent-A-Center, W., Inc. v. Jackson, 130 S.Ct. 2772, 2778 (2010). In Chavarria,


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the Ninth Circuit held that “[f]ederal law favoring arbitration is not a license to tilt

the arbitration process in favor of the party with more bargaining power.” 733 F.

3d at 927.

1. The Purported Arbitration Agreement Is Unconscionable.

a. Three Circuit Courts of Appeal have found similar

agreements unconscionable.

The Fourth, Seventh, and Eleventh Circuits have examined arbitration

agreements that were designed to insulate tribal lending entities from state and

federal law and concluded that these agreements were unenforceable under the

FAA. Parm v. Nat’l Bank of Calif., 835 F.3d 1331 (11th Cir. 2016); Hayes v

Delbert Serv., 811 F.3d 666 (4th Cir. 2016); Jackson v. Payday Fin., LLC, 764

F.3d 765, 777 (7th Cir. 2014); see also Inetianbor v. CashCall, Inc., 768 F.3d

1346, 1355 (11th Cir. 2014), cert. denied., 2015 U.S. Dist. LEXIS 2386 (U.S. Apr.

6, 2015). In Parm, the Eleventh Circuit held that an arbitration agreement that a

lending entity created in conjunction with the Cheyenne River Sioux Tribe was

unenforceable because “the arbitration agreement’s forum selection clause

mandates the use of an illusory and unavailable arbitral forum.” 835 F.3d at 1337.

In Hayes, the Fourth Circuit held that an arbitration agreement created by a tribal

lending operation was unenforceable because a party “may not flatly and

categorically renounce the authority of the federal statutes to which it is and must

remain subject.” Id. at 675. “The just and efficient system of arbitration intended


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by Congress when it passed the FAA may not play host to this sort of farce.” 811

F.3d at 674. Finally, in Jackson, the Seventh Circuit held that the agreement was

“both procedurally and substantively unconscionable” because, among other

things, it was not possible for the plaintiffs to understand the complex dispute

resolution process and there was “no prospect of a meaningful and fairly conducted

arbitration.” 764 F.3d at 778-79 (internal citation omitted).

The Payday Lenders (Think Finance, Rees, TC Loan Service, TC Decision

Sciences, LLC, Tailwind Marketing, LLC, and the two Silicon Valley venture

capital firms – Sequoia and TCV) attempt to distinguish Hayes by claiming that the

agreement in that case was different. Payday Lenders’ Brief (“PL Br.”) at 43; TD

Br. at 52-53. Defendants claim that, unlike in Hayes, the Purported Arbitration

Agreement does not bar the application of federal law. TD Br. at 52; PL Br. at 14-

15, 37, 43. This is incorrect. In even broader language than the Hayes agreement,

Defendants disclaim the applicability of federal law; borrowers “agree that no

other state or federal law or regulation shall apply to this Agreement, its

enforcement or interpretation.” Compare A258 with Hayes, 811 F.3d at 670

(borrower agrees “that no United States state or federal law applies to this

agreement.”); see also A263 (“Such voluntary use does not represent acquiescence

of the Chippewa Cree Tribe to any federal law unless found expressly applicable to

the operations of the Chippewa Cree Tribe offering such services.”). As the


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Payday Lenders concede, this disclaimer of federal law was what the Hayes court

found dispositive. PL Br. at 43 n.12. While Defendants trumpet the fact that the

District Court did not uncover this language from the Agreement, it is not

surprising that the District Court was unable to isolate this language from the

paragraphs of mind-numbing boilerplate that Defendants strung together. In fact,

what is surprising is that Defendants are arguing that Plaintiffs, ordinary

consumers, should have been able to decipher and understand this language when

they signed the Agreement. Defendants’ failure to identify the language in their

own agreement shows just how unconscionable the Agreement actually is.

The Purported Arbitration Agreement and the agreement in Hayes are

similar in many other ways. For example, both agreements state that they are

“subject solely to the exclusive laws and jurisdiction of [the respective tribe].”

Compare 811 F.3d at 669 with A258. They also both state that: “Neither this

Agreement nor Lender is subject to the laws of any state of the United States.”

Compare 811 F.3d at 669-70 with A263. And both agreements state that they are

made pursuant to a transaction involving or governed by “the Indian Commerce

Clause of the Constitution of the United States of America” and “the law[s] of the

[respective tribes].” Compare 811 F.3d at 670 with A263.

In the face of this strong authority from federal appellate courts, Defendants

cite several district court opinions: Yaroma v. Cashcall, Inc., 130 F. Supp. 3d 1055


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(E.D. Ky. 2015); Willams v. Cashcall, Inc., 92 F. Supp. 3d 847 (E.D. Wis. 2015);

and Kemph v. Reddam, No. 13 CV 6785, 2015 U.S. Dist. LEXIS 38861 (N.D. Ill.

Mar. 27, 2015). But these cases do not involve the level of fraud or

unconscionability that is alleged here. For example, none of these cases involve a

situation where outside entities purchased the substantive law that would apply to

any disputes.

b. Under Vermont Law, the Proposed Arbitration Process is

illusory because Defendants purchased the law governing

the arbitration and have not relinquished tribal immunity.

Unconscionability bars the enforcement of the Purported Arbitration

Agreement because under Vermont law, an arbitration procedure need only be

substantively unconscionable to be invalid. Glassford v. BrickKicker, 2011 VT

118, ¶13. In BrickKicker, a home inspection company created an arbitration

process where the sole available relief was the amount paid to conduct the home

inspection. Id. ¶14. The Vermont Supreme Court found that “the subject

contract’s illusory remedy for any claim for damages resulting from its provisions

limiting liability to the inspection fee and requiring binding arbitration costs that

would exceed the amount of the liability limit” was unconscionable. Id. ¶ 13.

Importantly, Vermont’s application of the unconscionability doctrine was

not an expression of any generalized hostility toward arbitration itself. In

BrickKicker, the Vermont Supreme Court relied on Val Preda Leasing, Inc. v.


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Rodriguez, 149 Vt. 129, 135 (1987), which dealt with a collision damage waiver in

a car rental contract. When the Vermont Supreme Court applied Val Preda, it was

applying general common law principles to the arbitration context and not a public

policy against arbitration. Brickkicker, 2011 VT 118, ¶13. The Vermont Supreme

Court’s application of the unconscionability doctrine satisfied the requirements for

invalidating an arbitration agreement under Section 2 of the FAA. 9 U.S.C. §2.8

Here, the arbitration provision is worse than the provision in BrickKicker.

Defendants have ensured the outcome by crafting Chippewa Cree law to favor loan

sharking operations. As a precondition to any deal with the Tribe, Rees and Think

Finance required the Tribe to “adopt a finance code that is acceptable to all parties

and provide for licensing of an arm of the tribe to engage in consumer lending.”

A73. The Term Sheet also stipulated that the Tribe use “best efforts” to “[r]evise

the Tribal Credit Transaction Code to provide for a broader array of lending

products.” A75. The Term Sheet forced the Tribe to use Pepper Hamilton as

counsel, id., and Think Finance not only paid Pepper Hamilton’s legal fees, it paid

the firm a “bonus” for securing the Tribe’s participation in the Plain Green scheme.

8 Littlejohn v. Timberquest Park at Magic, LLC, 116 F. Supp. 3d 422 (D. Vt.

2015), does not support the Payday Lenders’ position. The District Court judge in

this case, who also decided Littlejohn, used Littlejohn to find that the Purported

Arbitration Agreement was unconscionable. SPA26. Moreover, even in

Littlejohn, the arbitration agreement was found to be unconscionable. The court

held that picking an arbitrator with a potential bias toward the ski industry was

substantively unconscionable. 116 F. Supp. 3d at 431.


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A75, A88, ¶11. By controlling the Tribe’s counsel, Rees and Think Finance

controlled the content of the Purported Arbitration Agreement and dictated the

terms of Chippewa Cree law. A50 ¶¶110, 112. In the end, the Tribe enacted law

that specifically protects the loan sharking operations of Plain Green. Section 10-

3-201 of Chippewa Cree law eliminates any caps on interest rates. A320. Section

10-8-101 eliminates all federal and state law that is contrary to Chippewa Cree

law: “Except as otherwise provided in this Code or the other laws of the Tribe,

Loan Agreement between any Creditor authorized by the Tribe to lend money and

a Consumer shall be governed by this Code and the laws of the Tribe

notwithstanding any federal law or Tribal law to the contrary.” A342 (emphasis

added). As a result, an arbitrator following Chippewa Cree law cannot apply any

of the consumer protection laws that exist under either state or federal law,

including the Vermont Consumer Fraud Act and RICO.

Under Chippewa Cree law, consumers have only one remedy for an

egregious fraudulent loan agreement – the right of rescission. Under Section 10-3-

601(a), a loan can be rescinded one day after it is issued if the consumer repays

100% of the loan. A323. Section 10-3-601(c) provides that “[e]xcept as provided

in §10-3-601(a), a Consumer does not have a right to rescind a Loan unless the

Creditor agrees to the rescission in writing.” Defendants point to Section 10-3-602

of Chippewa Cree law, which they claim provides a remedy if the arbitration


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agreement is “oppressive, unconscionable, unfair or in substantial derogation of a

Consumer’s rights.” PL Br. at 33; A324. However, this provision does not explain

what happens if an arbitration agreement is unconscionable. Under Chippewa

Cree law, it does not appear that the consumer has any remedy if this occurs. The

only remedy for consumers under the Chippewa Cree financial code is the illusory

right of rescission, and this right has already passed. Under Section 10-3-601(c),

even if the loan agreement is “unconscionable,” it cannot be rescinded without the

consent of Plain Green. As a result, Section 10-3-602 provides no remedy at all.

Defendants do not cite any case decided by any Chippewa Cree tribal court

that has ever invalidated, or even interpreted, an arbitration agreement under

Chippewa Cree law. In fact, Defendants have not provided a single case decided

by a tribal court on any subject. Plaintiffs are not in a position to furnish this Court

with any of these decisions – if any exist – because Chippewa Cree law is

unavailable to Plaintiffs. A79-81 ¶¶12-19. In this case, Defendants have exclusive

control and possession over the purported “law” and maintain an unfair tactical

advantage by being able to distribute this tribal law whenever it is convenient for

them. Based on what has been selectively provided by Defendants so far, the

Payday Lenders got exactly what they paid for: an arbitration agreement that can

never be invalidated in Chippewa Cree courts.


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Defendants also added another layer of protection for themselves under

Chippewa Cree law; they have not waived immunity. The Agreement provides

that any concession on venue for arbitration “shall not be construed in any way . . .

as a relinquishment or waiver of the Chippewa Cree Tribe’s sovereign status or

immunity. . . .” A264. Section 10-4-106 of the Chippewa Cree Tribal Lending

and Regulatory Code confirms that no waiver of immunity exists. It states that

“[n]othing in this Code . . . shall be deemed or construed to be a waiver of

sovereign immunity from a suit or counterclaim of the Tribe, a consent of the Tribe

to the jurisdiction of the United States . . .” A326. Even if an arbitrator awards

relief to Plaintiffs in this case, the Agreement provides Defendants with the right to

have any award reviewed by a Chippewa Cree tribal court. The Agreement states:

“The arbitrator shall make written findings and the arbitrator’s award may be filed

with a Tribal court. The arbitration award shall be supported by substantial

evidence and must be consistent with this Agreement and Tribal Law, and if it is

not, it may be set aside by a Tribal court upon judicial review.” A265. During this

final stage of review, Defendants will seek to void any arbitration award because

of the tribal immunity reserved under the Agreement. As a result, the arbitration

remedy provided by the Agreement is merely illusory.


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c. The Proposed Arbitration Process is illusory because

Chippewa Cree Tribal Courts do not have jurisdiction to

determine the questions reserved to them.

Under federal law, Chippewa Cree tribal courts do not have jurisdiction to

resolve this dispute. The Purported Arbitration Agreement specifically envisions

that tribal courts will play a role in resolving certain disputes. For example, the

Agreement states that “the validity, effect and enforceability of this waiver of class

action lawsuit and class wide arbitration, if challenged, are to be determined solely

by a court of competent jurisdiction located with the Chippewa Cree Tribe not by

the AAA, JAMS or an arbitrator.” A265. Moreover, Defendants have the right to

have a tribal court confirm any arbitration award. Id. However, because the tribal

courts do not have the power to rule on the issues the Agreement reserves to them,

the Agreement is illusory.

“[T]ribes do not, as a general matter, possess authority over non-Indians who

come within their borders. . . .” Plains Commerce Bank v. Long Family Land Co.,

554 U.S. 316, 328 (2008); see also Nevada v. Hicks, 533 U.S. 353, 367 (2001)

(“Respondents’ contention that tribal courts are courts of ‘general jurisdiction’ is

also quite wrong.”). In Plains Commerce Bank, the Supreme Court noted that:

“Tellingly, with only ‘one minor exception, we have never upheld under Montana

the extension of tribal civil authority over nonmembers on non-Indian land.’”

Plains Commerce Bank, 554 U.S. at 333 (referring to Montana v. United States,


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450 U.S. 544 (1981) (emphasis in original; citations omitted)). There are only two

situations where tribal courts may exercise jurisdiction over nonmembers: (1)

when there is a consensual relationship on the reservation or (2) when the

nonmembers’ “conduct threatens or has some direct effect on the political

integrity, the economic security, or the health or welfare of the tribe.” 554 U.S. at

329. In addition, a tribal court may only exercise jurisdiction based on a

consensual relationship on the reservation when the nonmembers consent and the

exercise of the tribe’s jurisdictional power is necessary either: (1) to preserve tribal

self-government or (2) to control internal relations. Id. at 337.

In this case, there is no consensual relationship on the reservation that would

enable the Chippewa Cree tribal courts to exercise jurisdiction over the borrowers

of the Plain Green enterprise. The District Court found that the relationship

between the Plain Green enterprise and borrowers is not physically located on the

reservation. SPA11. Under the consensual relationship test laid out in Plains

Commerce Bank, the relationship must be physically located on the reservation for

a tribal court to exercise jurisdiction over a nonmember. Strate v. A-1 Const., 520

U.S. 438, 456-57 (1997). In addition, the consensual relationship exception does

not apply because the relationship that the Plain Green enterprise established with

the borrowers is fraudulent and tortious. Strate v. A-1 Const., 520 U.S. 438, 456-

57 (1997).


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The second Montana exception also does not apply. For the exception to

apply, the nonmembers’ conduct has to “threaten[] or [have] some direct effect on

the political integrity, the economic security or the health or welfare of the tribe.”

Id. at 457-58. “Read in isolation, the Montana rule’s second exception can be

misperceived. Key to its proper application, however, is the Court’s preface:

‘Indian tribes retain their inherent power [to punish tribal offenders,] to determine

tribal membership, to regulate domestic relations among members, and to prescribe

rules of inheritance for members. . . But [a tribe’s inherent power does not reach]

beyond what is necessary to protect tribal self-government or to control internal

relations.” Id. at 459 (quoting Montana v. United States, 450 U.S. 544, 564

(1981)) (brackets in original).

The activity here is not of the type that the Montana Court felt integral to the

second Montana exception. A commercial enterprise directed to the outside world

does not implicate tribal self-government. Nor does it implicate control of the

Tribe’s internal relations because the Tribe is loaning money to nonmembers, not

members of the Tribe. Moreover, as a factual matter, the Plain Green enterprise

has had a negative effect on the government of the Tribe and has resulted in further

corruption and criminal behavior. A55-57, ¶¶ 132-44, A280-85, A298-313.

Because neither of the Montana exceptions applies, Chippewa Cree courts do not


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have jurisdiction to rule on any dispute regarding the Purported Arbitration

Agreement. Jackson, 764 F.3d at 782.

d. The Purported Arbitration Agreement is unenforceable

because it has several features that are both procedurally

and substantively unconscionable.

The Purported Arbitration Agreement has other features that are

procedurally and substantively unconscionable and make it unenforceable.

Because the claims associated with the Plain Green enterprise involve small dollar

amounts, there is little incentive for an individual to bring a lawsuit. This is

particularly true because payday loans target people who are financially challenged

and have few, if any, resources to bring a claim. A90-91 ¶1, 11; A93-94 ¶1, 11.

The Agreement also has a “loser pays” provision for shifting costs that discourages

small claims from being filed: “Unless prohibited by law, the arbitrator may award

fees, costs, and reasonable attorney’s fees to the party who substantially prevails in

the arbitration.” A264.

The Agreement is unconscionable because its terms are not easily

discovered on the Plain Green website. While there is a confusing collection of

legal statements on the Plain Green website, borrowers are unable to see a copy of

their loan contract, including the Purported Arbitration Agreement, before they

complete an application for a loan. SA91. Moreover, when there is a hint of

litigation, Defendants cut off access to the borrowers’ accounts so they can no


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longer access the documents that purport to structure the relationship between

Plain Green and the borrowers. A91 ¶12; A94 ¶12. In other words, the borrowers

have no access to the Agreement that supposedly governs their relationship with

Plain Green.

A finding of unconscionability is also supported in this case because of the

existence of inconsistent provisions in the Purported Arbitration Agreement about

the powers of the arbitrator and the powers of the tribal court. Under the

Agreement, the dispute between the borrowers and Plain Green is submitted to

arbitration, but disputes about the validity of the purported class action waiver are

to be determined by Chippewa Cree tribal courts. This section of the Agreement is

difficult to read, sets up an impossible to follow process, and supports a finding of

unconscionability. A265. In addition, the Agreement provides that Defendants

reserve the right to confirm any arbitration award with a Chippewa Cree tribal

court. Ultimately, Defendants will be able to use this review as an opportunity to

assert tribal immunity and void any arbitration award. The doctrine of tribal

immunity is not a doctrine that the vulnerable people in this class are likely to

understand. A91 ¶ 7; A94 ¶ 7. This is yet another reason why this Court should

affirm the District Court’s ruling that the Agreement is unconscionable.

The Purported Arbitration Agreement is also unconscionable because it is

impossible for anyone other than Defendants and the Tribe to determine what


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Chippewa Cree law is. The 2006 version of Chippewa Cree law, which Plaintiffs’

counsel believed was the most recent version of that law, is difficult to access.

A79-81, ¶¶12-19. The University of Montana Law School will only provide a

copy of the 2006 version of the Chippewa Cree law to people who visit the law

library in Montana. In addition, the 2006 version of the law is not available on the

internet. A80 ¶16. The Tribe’s website does not make the 2006 Chippewa Cree

law available, which appears to be the purportedly operative law.

2. The Court Should Apply Vermont Law When Examining The

Purported Arbitration Agreement.

The Payday Lenders urge this Court to use Chippewa Cree law to determine

whether this case is arbitrable. But that argument is baseless. As an initial matter,

when the District Court reviewed the case, the Payday Lenders took the position

that Vermont law could be used to resolve issues of “contract formation and

enforceability.” Doc. 64 at 11 n.4. In addition, it would be unconscionable for the

Court to use a law that Defendants purchased to determine the arbitrability of this

case.

The Payday Lenders’ argument that the District Court improperly used

Vermont law is surprising. PL Br. at 29-33. In the District Court, the “Think

Finance Defendants” (which consisted of Think Finance, Inc., TC Loan Services,

TC Decision Sciences, LLC, and Tailwind Marketing, LLC) stated: “The Think

Defendants do not object to the application of Vermont law as to issues of contract


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formation and enforceability, as they do not believe the outcome would be

different under tribal law on those issues.” Doc. 64 at 11 n.4. The other

Defendants joined those arguments. See Doc 67-2 at 10 (Rees); Doc. 76 at 18 n.6

(TCV); Doc.77-1 at 8-9 (Sequoia); Doc. 95 at 9 n.9 (Think Finance Defendants’

reply). The Payday Lenders should not be allowed to argue the issue one way

below and then take the exact opposite position on appeal.

Even though the Payday Lenders never argued that the District Court should

use Chippewa Cree law to determine whether the Agreement was enforceable, they

now chide the District Court for insufficiently analyzing whether the law should be

used. They characterize the District Court’s discussion of the Chippewa Cree law

supposedly governing arbitration “as a curt rejection of the ‘explicit standard’ in

Section 10-3-602.” PL Br. at 32. However, that characterization is unfair. The

District Court was responding to an argument that the Tribal Defendants (not the

Payday Lenders) made on the last two pages of their reply, in an 800-word

footnote in 10-point font (which violated Vermont District Court Local Rule

10(a)(4) & (7)). Doc. 92 at 12-13 n.13. That argument was waived because it was

made in a footnote that did not comply with the local rules, but nevertheless, the

District Court addressed it and determined that Vermont law should govern the

issue of whether the Agreement was unconscionable.


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The District Court’s decision to apply Vermont law was well-grounded.

Courts have repeatedly rejected the application of tribal law and applied the law of

other forums to determine whether an arbitration clause is unconscionable. See,

e.g., Parm, 835 F.3d at 1335 (applying Georgia law); Hayes, 811 F.3d at 672

(applying federal law); Jackson, 764 F.3d at 776-77 (applying Illinois law);

Inetianbor, 768 F.3d at 1355 (Restani, J., concurring) (applying Florida law). In

Jackson, the Seventh Circuit held that it was unreasonable to use Cheyenne River

Sioux law to determine whether the agreement was enforceable because the law

provided no guidance regarding arbitration. Id. at 776. The Court applied Illinois

law to determine that the arbitration agreement was unconscionable. Id. at 777.

In this case, the Purported Arbitration Agreement specifies that Chippewa

Cree law governs the Agreement. However, application of Chippewa Cree law is

unreasonable for several reasons. First, the Payday Lenders entered into an

agreement with the Tribe that enabled the Payday Lenders to dictate the substance

of Chippewa Cree law and insulate the Plain Green enterprise from liability. A73-

77. Second, the section of Chippewa Cree law that the Payday Lenders now cite,

Section 10-3-602, merely states that an agreement is unenforceable if it is

unconscionable, but does not elaborate on how this will be determined or what this

means. Moreover, this section appears to have been created by the Payday Lenders

themselves. Compare A75 (the Term Sheet containing the “Tribal Credit


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Transaction Code”) with A315 (the “Chippewa Cree Tribal Lending and

Regulatory Code”). In addition, it is nearly impossible to access the statutes, rules,

or decisions that define Chippewa Cree law. A79-81, ¶¶12-19. The law is not

available through law libraries without visiting Montana. Id. It is not available

over the internet. Id. Plaintiffs were not the only ones that had exceptional

difficulty finding this law. As the District Court noted, several district courts have

had difficulty finding the appropriate law. SPA 27-28 n.15 (collecting district

court cases where courts could not find Chippewa Cree law). As a result, this

Court should apply Vermont law in determining whether the Agreement is

unconscionable.

The Payday Lenders also point to Section 10-3-602 and assert that

“[b]ecause the Arbitration Agreements at issue do, in fact, comply with the

applicable standard set forth by the American Arbitration Association, they are

presumptively valid under Chippewa Cree law and should have been honored.” PL

Br. at 30-31. However, the Payday Lenders do not cite a single case that supports

their proposition that the Agreement complies with the rules of the American

Arbitration Association (“AAA”). In fact, the Purported Arbitration Agreement

does not comply with AAA rules because it prevents any neutral outcome by

providing that the Agreement (and incorporated Chippewa Cree law) controls over

AAA rules, directing the pre-ordained outcome that the Payday Lenders bought.


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A264. The Payday Lenders’ failure to raise this argument in the District Court,

and their failure to identify the specific “applicable standard” to which they refer is

important. PL Br. at 30-31. If this argument had been raised below, Plaintiffs

could have responded to explain precisely how the Agreement and Delegation

Clause violate AAA principles, including that the Agreement does not provide:

(1) a fundamentally fair process (Principle 1); (2) access to information regarding

the ADR program (Principle 2); (3) an independent and impartial arbitrator and an

independent administration of the arbitration process (Principle 3); (4) a reasonably

convenient location for the arbitration (Principle 7); (5) a clear and adequate notice

of the arbitration provision (Principle 11a); (6) reasonable access to information

regarding the arbitration process (Principle 11b); (7) a fundamentally fair hearing

(Principle 12.1); (8) access to information (Principle 13); and adequate arbitral

remedies (Principle 14). American Arbitration Association, Consumer Due

Process Protocol Statement of Principles, https://adr.org/aaa/ShowPDF?doc=

ADRSTG_ 005014 (last accessed on December 20, 2016). To the extent that the

Court even finds this important, it would be prejudicial to Plaintiffs to not allow

them an opportunity to make these arguments.


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3. Governance Concerns Within The Chippewa Cree Tribe

Frustrate The Intention Of The Purported Arbitration

Agreement.

Because the District Court found that the Purported Arbitration Agreement

was unconscionable, it never reached Plaintiffs’ additional argument that the

purpose of the Agreement was frustrated. As Plaintiffs noted in the District Court,

ongoing corruption in the Tribe and instability in the Tribal Judiciary will frustrate

the intent of the arbitration provision for a swift resolution. “Where, after a

contract is made, a party’s principal purpose is substantially frustrated without his

fault by the occurrence of an event the non-occurrence of which was a basic

assumption on which the contract was made, his remaining duties to render

performance are discharged, unless the language or the circumstances indicate the

contrary.” Restatement (Second) Contracts §265; see also SKI, Ltd. v.

Mountainside Props., 2015 VT 33, ¶36 n.9.

The Arbitration Agreement expressly states that “Arbitration procedures are

simpler and more limited than court procedures.” A264. The arbitration will be

neither simple nor limited because there is substantial uncertainty about who is in

charge of the Tribe and the Tribal Judiciary. A55-57, ¶¶132-44.

4. The Purported Arbitration Agreement Is Fraudulent.

As the District Court ruled, Plaintiffs adequately alleged that Defendants

engaged in a fraudulent scheme to avoid state and federal usury laws. SPA31-32


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and 35. The Term Sheet shows that the Purported Arbitration Agreement also

contained specific false statements that defrauded Plaintiffs.

First, the Agreement states that the “Lender” was Plain Green, LLC. The

Term Sheet reveals that this statement was false. Plain Green only received 4.5%

of the revenues, and it did not provide any of the money that was loaned. A73-74.

In addition, the Payday Lenders ran all of the operations of Plain Green. A43-47,

¶¶80-99, A48, ¶101.

Second, the Arbitration Agreement never disclosed that there was a

significant problem with corruption at Plain Green and the Tribe. For example, the

sworn affidavit of former Plain Green CEO Neal Rosette avers that Rees and Think

Finance forced the Tribe’s Business Committee to fire the Chairman of the Tribe,

St. Marks, because St. Marks posed a threat to Think Finance when he sought more

money for the Tribe from the Plain Green enterprise. A88, ¶¶8-11. An anonymous

witness interviewed by the FBI and the Department of the Interior reported that

“the Business Committee removed Blatt-St. Marks as Chairman to continue to hide

their wrong doings.” SA16. The witness reported that “every single one of the

Business Committee members have taken something, i.e. money, equipment,

vehicles.” Id. In addition, several former tribal officials have been convicted of,

or pled guilty to, embezzlement and bribery. A55-56 ¶¶132-35; SA94-175. A

collection of their plea agreements is attached. SA94-175. This corruption also


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extended to Plain Green. A57 ¶¶138-39. The United States Attorney in Montana

obtained an indictment from a grand jury against the former leaders of Plain Green.

A278 ¶6; A298-13. The charges in that case included mail fraud, and both of the

former leaders of Plain Green, Neal Rosette and Billi Anne Raining Bird Morsette,

pled guilty. Rosette Plea; Morsette Plea. Finally, the former Chairman of Plain

Green, John Chance Houle, who signed the Term Sheet, has pled guilty to federal

crimes. SA94-133.

Third, the Purported Arbitration Agreement represents that the “agreement .

. . shall be governed by the law of the Chippewa Cree Tribe.” A265. However,

the Term Sheet, which was never disclosed to Plaintiffs, reveals that the relevant

“law of the Chippewa Cree Tribe” was bought and paid for by nonmembers of the

Tribe and was not “law” at all. A54, ¶125. Instead, Chippewa Cree law was what

Think Finance dictated. As the Term Sheet states: “The Tribe will adopt a finance

code that is acceptable to all parties and provide for licensing of an arm of the tribe

to engage in consumer lending.” A73. The Term Sheet further states that the

Tribe must “[r]evise the Tribal Credit Transaction Code to provide for a broader

array of lending products.” A75.

Fourth, the Purported Arbitration Agreement states that: “Neither this

Agreement nor the Lender is subject to the laws of any state of the United States.”

A263. This statement is false because the loans involve off-reservation activity


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and Defendants are subject to state law. The Tribal Defendants have even

confirmed the falsity of this representation. TD Br. at 20 n.4. (“Plaintiffs argue

that Tribes’ off-reservation commercial activities are subject to state regulation.

That is generally true.”).

These fraudulent statements injured Plaintiffs. Plaintiffs’ declarations show

that they relied on the representations and deferred taking legal action because of

the purported immunity of Plain Green. A91 ¶10; A94 ¶10. Plaintiffs were

unaware of Defendants’ misrepresentations because Plaintiffs did not and could

not know that key statements in the Agreement were false. A91 ¶¶7-9, A94. ¶¶7-9.

Finally, Plaintiffs were harmed as a result of Defendants’ misrepresentations. A92

¶15.

Under Vermont law, a court may order rescission of a contract if there is

fraud in the inducement. Sarvis v. Vermont State Colleges, 172 Vt. 76, 79-80

(2001). A court may also order rescission if the promises made “were steps in a

scheme to defraud the plaintiffs and were a most apt and effectual means of

accomplishing the fraud.” Comstock v. Shannon, 116 Vt. 245, 250 (1950); Land

Fin. Corp. v. Sherwin Elec. Co., 102 Vt. 73, 82 (1929). If the Court does not

affirm the District Court’s ruling on unconscionability, it should remand the case

for a determination of whether the Purported Arbitration Agreement is

unenforceable because it is fraudulent.


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5. The Purported Right To Opt Out Of Arbitration Is Illusory.

Defendants argue that the Agreement should be enforced because if

Plaintiffs wanted to avoid the arbitration process, they could have simply opted

out. PL Br. at 38. However, the supposed “opt out” provision is nothing more

than a dead end. A borrower who exercises the right to opt out of the arbitration

process is actually opting in to an adjudication in front of a Chippewa Cree tribal

court in Montana. A263. Given the difficulty of gaining access to the substantive

and procedural law that supposedly governs the dispute, there is no possibility that

Plaintiffs would be able to navigate the procedural rules of a foreign court system

thousands of miles away. In addition, as previously discussed, Chippewa Cree

courts do not have jurisdiction to adjudicate Plaintiffs’ claims. See supra at 63-66.

Finally, the outcome of any proceeding in the Chippewa Cree courts has already

been determined because Defendants control the substantive law and the judiciary.

As a result, the purported “opt out” provision cannot save the arbitration

agreement. Parnell v. Cash Call, Inc., No. 4:14-cv-0024, 2016 U.S. Dist. LEXIS

52516, *35-36 (N.D. Ga. March 14, 2016) (holding in a tribal lending case that an

“opt-out provision while initially appearing helpful, [did] not resolve any of the

key difficulties” because “any disputes would still be governed by the laws of the

Cheyenne River Sioux Tribe”).


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6. The Doctrine of Severability Is Inapplicable.

Defendants argue that if this Court finds any part of the Purported

Arbitration Agreement unconscionable, it should sever that provision and enforce

the rest of the Agreement. TD Br. at 54. In support of this argument, Defendants

point to a boilerplate severability clause that they stuffed into the Agreement. As

an initial matter, Defendants waived this argument because they only raised it in a

one sentence footnote in their reply brief in the District Court. Doc. 95 at 14 n.16;

See, e.g., Chhabra v. U.S., 720 F.3d 395, 408 (2d Cir. 2013) (rejecting argument

that district court erred in refusing to consider claim that was raised first time in

district court reply brief).

Even if Defendants’ severability argument were properly before this Court,

the argument has no merit. Under Vermont law, when a portion of an arbitration

agreement is unconscionable, a boilerplate severability clause will not save the

remainder of the agreement. Glassford, 2011 VT 118, ¶30. This is true under

federal law as well. In Hayes, which was a case involving an arbitration agreement

crafted by a lending entity affiliated with the Cheyenne River Sioux Tribe, the

Fourth Circuit noted: “It is a basic principle of contract law that an unenforceable

provision cannot be severed when it goes [to] the ‘essence’ of the contract.” 811

F.3d at 675-76. Moreover, the Fourth Circuit held that: “Severance should also not

be used when an agreement represents an integrated scheme to contravene public


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policy.” Id. at 676 (emphasis added); see also Parnell, 2016 U.S. Dist. LEXIS at

*51.

In this case, as in Hayes, “the offending provisions go to the core of the

arbitration agreement.” Hayes, 811 F.3d at 676. In Hayes, “[i]t [wa]s clear that

one of the animating purposes of the arbitration agreement was to ensure that

Western Sky and its allies could engage in lending and collection practices free

from the strictures of state and federal law.” Id. Here, the purpose of the

Agreement is also to shield Defendants’ illegal usury practices from state and

federal law. In addition, it would be impossible to sever the offending provisions

of the Agreement here because the purchased Chippewa Cree law runs through the

entire Agreement. There is no way to disentangle the unconscionable application

of Chippewa Cree law from the remainder of the Agreement.

C. The Delegation Clause Is Invalid.

1. The Delegation Clause Does Not Clearly And Unmistakably

Delegate The Issue Of Arbitrability To The Arbitrator.

A delegation clause is a portion of an arbitration agreement that empowers

an arbitrator to decide if the parties agreed to arbitrate a particular dispute. A court

should not determine that a delegation clause exists unless there is “clear and

unmistakable evidence” that the parties agreed that the arbitrator should decide the

arbitrability question. First Options v. Kaplan, 514 U.S. 938, 944-45 (1995).

When there is a direct attack on the delegation clause, a court – not an arbitrator –


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determines issues of arbitrability. Rent-A-Center, W., Inc. v. Jackson, 130 S.Ct.

2772, 2779 (2010); see also id. at 2777 n 1.

In addressing the issue of whether the Agreement contains an enforceable

delegation clause, the Payday Lenders unfairly characterize the District Court’s

opinion and take a position contrary to what they argued before the District Court.

PL Br. at 18. In their Motion to Dismiss, the Think Finance Defendants said: “A

challenge to an agreement to delegate on those grounds is to be decided by the

court.” (Doc. 64 at 10); see also Doc 67-2 at 10 (Rees); Doc. 76 at 18 n.6 (TCV);

Doc.77-1 at 8-9 (Sequoia). But now, Defendants have abandoned this position and

argue that an arbitrator should decide whether there is an enforceable delegation

clause.

Regardless of what position Defendants decide to take, there is no

enforceable delegation clause in the Agreement. First, a review of the purported

Delegation Clause shows that it is not a clear and unmistakable delegation of

power to the arbitrator to decide whether arbitration is available in this case:

The arbitrator has the ability to award all remedies

available under the Chippewa Cree Tribe’s tribal law,

whether at law or in equity, to the prevailing party,

except that the parties agree that the arbitrator has no

authority to conduct class-wide proceedings and will be

restricted to resolving the individual Disputes between

the parties. The validity, effect, and enforceability of this

waiver of class action lawsuit and class-wide arbitration

is to be determined solely by a court of competent

jurisdiction located within the Chippewa Cree Tribe, and


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not by the arbitrator. If the court refuses to enforce the

class-wide arbitration waiver, or if the arbitrator fails or

refuses to enforce the waiver of class-wide arbitration,

the parties agree that the Dispute will proceed in tribal

court and will be decided by a tribal court judge, sitting

without a jury, under applicable courts rules and

procedures and may be enforced by such court through

any measures or reciprocity provisions available.

A265. The Delegation Clause states that “the arbitrator has no authority to conduct

class wide proceedings and will be restricted to resolving the individual Disputes.”

Id. This is a class action and not an “individual Dispute.” By restricting the

arbitrator to “individual Disputes,” the parties removed all issues connected to

class wide proceedings, including the question of arbitrability.

Second, Chippewa Cree law does not empower arbitrators to decide whether

disputes are arbitrable. While Section 10-3-602 mentions unconscionability, it

does not describe what powers an arbitrator has under Chippewa Cree law.

Compare A324 with the FAA, 9 U.S.C. §5. To address this deficiency, Defendants

claim that Chippewa Cree law can be supplemented with federal and state law. TD

Br. at 42 n.7. This argument ignores the fact that the Agreement and the Chippewa

Cree financial code, which Defendants purchased, expressly disclaim the

application of federal law. Specifically, Section 10-8-101 makes Chippewa Cree

law the only applicable law, notwithstanding federal law to the contrary. A342.

Likewise, the Agreement itself bars the application of federal law. A258 & A263.

Any arbitrator operating under the Agreement and Chippewa Cree law would have


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no basis for invalidating the Delegation Clause because there is no tribal law on the

subject. As a result, any delegation of the decision about arbitrability is merely

illusory.

Defendants argue that Plaintiffs have supposedly misidentified a class action

waiver as a delegation clause (TD Br. at 37; PL Br. at 24), but this argument is

meritless. The first phrase of the paragraph has nothing to do with class actions:

“The arbitrator has the ability to award all remedies available under tribal law . . .

.” And although the second part of the sentence discusses class actions, it only

does so for the purpose of taking away the arbitrator’s power to hear them: “except

that the parties agree that the arbitrator has no authority to conduct class-wide

proceedings and will be restricted to resolving the individual Disputes between the

parties.” A265.

Defendants also focus on several inapposite cases to support their argument.

TD Br. at 36.9 The first case, T. Co. Metals, LLC v. Dempsey Pipe & Supply, Inc.,

592 F.3d 329, 344 (2d Cir. 2010), was a case where both parties to an arbitration

moved the arbitrator to reconsider the award he had rendered. After the arbitrator

9 Defendants cite Parnell v. Cash Call, Inc., 804 F.3d 1142, 1148 (11th Cir.

2015), but neglect to mention that the Eleventh Circuit remanded the case to the

district court to allow the plaintiff leave to amend. On remand, the district court

invalidated the delegation clause of the arbitration agreement. Parnell, 2016 U.S.

Dist. LEXIS at *51. The Eleventh Circuit recently affirmed that ruling. 2016 U.S.

App. LEXIS 20774 (11th Cir. Nov. 21, 2016).


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affirmed the bulk of his award, both parties sought to vacate or modify parts of the

award in federal court. Importantly, that case did not involve a situation where one

of the parties was arguing that a court, not an arbitrator, should decide the issue of

whether an unconscionable and fraudulent arbitration agreement was enforceable.

The question before this Court in T. Co. was whether an arbitrator had the power to

decide whether it had the ability to address a motion to reconsider. This Court

never reached the issue of whether the language of the arbitration agreement

“clearly and unmistakably” expressed an intention to delegate to the arbitrator the

question of whether he had the power to rule on a motion to reconsider. Instead,

this Court based its decision on the conduct of the parties because both parties

requested that the arbitrator reconsider the award. See id. at 344.

The second case, Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d

Cir. 2005), is also inapposite. Contec involved a situation where the parties had

unambiguously incorporated an arbitration organization’s rules. Id. at 208 (“such

controversy shall be determined by arbitration held . . . in accordance with the

Commercial Arbitration Rules of the American Arbitration Association”).

However, this case is distinguishable because the Purported Arbitration Agreement

does not clearly and unambiguously incorporate the rules of AAA or JAMS.

The Tribal Defendants argue that two lines in the Agreement referencing the

AAA and JAMS satisfy the “clear and unmistakable” standard. TD Br. at 37. But


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there is nothing clear about this Agreement other than the fact that Defendants

specifically designed it to prevent Plaintiffs from ever getting a just award. The

relevant provision states: “The policies and procedures of the selected arbitration

firm applicable to consumer transactions will apply provided such policies and

procedures do not contradict this Agreement to Arbitrate or Tribal Law. To

the extent the arbitration firm’s rules or procedures are different than the terms of

this Agreement to Arbitrate, the terms of this Agreement to Arbitrate will apply.”

A264 (emphasis added). The first sentence makes only “policies and procedures”

applicable to consumer transactions; it does not make “rules” applicable. This is

important because the AAA has both. Compare, AAA Policy on Appellate

Arbitration Procedures in Consumer Arbitration Matters and Consumer Due

Process Protocol with AAA Consumer Arbitration Rules.

https://www.adr.org/aaa/faces/aoe/gc/consumer?_afrLoop=490599636974530&_af

rWindowMode=0&_afrWindowId=null#%40%3F_afrWindowId%3Dnull%26_afr

Loop%3D490599636974530%26_afrWindowMode%3D0%26_adf.ctrl-

state%3D1988qxviqh_306 (last accessed on November 3, 2016). As a result, the

AAA consumer transaction rules do not apply under the Agreement. And even if

they did apply, the second sentence makes it clear that Tribal Law is predominant

over the policies, procedures, and rules of any arbitration organization.


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Under Second Circuit law, an agreement does not contain a clear and

unmistakable delegation clause when it makes the rules of an arbitration

organization inferior to other law or rules. NASDAQ OMX Group, Inc. v. UBS,

Sec., LLC, 770 F.3d 1010, 1031-32 (2d Cir. 2014). In NASDAQ, an arbitration

agreement stated that: “Except as may be provided in the NASDAQ OMX

Requirements, all claims, disputes, controversies and other matters in question

between the parties to this Agreement . . . shall be settled by final and binding

arbitration.” Id. at 1031. The NASDAQ Court held that this language made “it far

from ‘clear and unmistakable’ that the Services Agreement provides UBS with an

arbitrable claim.” Id. at 1032. As a result, the Court determined that it should

make the decision of whether an arbitrable claim existed:

The Services Agreement need not clearly remove the

question of arbitrability from arbitration in order for that

question to be one for judicial determination. Rather,

UBS must point to a clear and unmistakable expression

of the parties’ intent to submit arbitrability disputes to

arbitration. . . . UBS cannot carry that burden by pointing

to a broad arbitration clause that the parties subjected to a

carve-out provision.

Id. Here, the language disclaiming the applicability of the rules and procedures of

either AAA or JAMS is nearly identical to the language in NASDAQ. The

Agreement states: “To the extent the arbitration firm’s rules or procedures are

different than the terms of this Agreement to Arbitrate or Tribal Law” they will not


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apply. As a result, there is no clear and unmistakable delegation to the arbitrator

under the Purported Arbitration Agreement.

Finally, Defendants try to save their delegation clause by making a new

assertion that “arbitral awards are always subject to judicial review under the

FAA.” TD Br. at 38. Not only is this not true under the Purported Arbitration

Agreement, it provides another reason why the Agreement is unconscionable and

unenforceable. The Payday Lenders argue that when the Agreement says that an

arbitration award “may” be confirmed by the Chippewa Cree tribal courts, this

does not mean that it must be confirmed by them. PL Br. at 40. But there is no

doubt that Defendants inserted this clause in the Agreement to protect themselves

against any award issued by a AAA or JAMS arbitrator; this clause ensures that

Defendants will be able bring the dispute back to a forum that they effectively

control. Defendants’ new interpretation of the Agreement also runs contrary to

both the plain language of the Agreement and the Tribe’s finance code, which

makes tribal court the only avenue of appeal. A263, A258, A342. If a federal

court review option existed, the Agreement would say that an award “may be set

aside by a Tribal court or a federal court upon judicial review.” A265 (new

hypothetical language in italics). The Purported Arbitration Agreement only

allows one path for judicial review. No ordinary person reading the language

would think that federal review is available.


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2. The Delegation Clause Is Unconscionable.

The Delegation Clause is unconscionable because it is illusory. It seemingly

gives the arbitrator the authority to decide whether the case is arbitrable, but fails

to provide any mechanism to invalidate the Agreement. The Agreement states

that: “The arbitrator has the ability to award all remedies available under Tribal

Law.” A265. But the tribal finance code that Rees and Think Finance purchased

renders the arbitrator powerless to invalidate the Purported Arbitration Agreement.

Because Section 10-3-601(c) of the Chippewa Cree Code excludes all other

remedies other than a one day cancellation and Section 10-8-101 preempts federal

law that is inconsistent with Chippewa Cree law, the Agreement and Chippewa

Cree law preempt the broader remedies found in Section 2 of the FAA. The only

remedy available to the arbitrator is rescission, which is already barred because

more than one day has passed. See Parm, 835 F.3d at 1338 (invalidating

delegation clause because of the unavailability of arbitral forum); Ryan, 2016 U.S.

Dist. LEXIS 121246 at *15 (invalidating delegation clause because of wholesale

waiver of federal law).

The Delegation Clause is also unconscionable because no one can actually

understand it. A borrower cannot find the applicable Chippewa Cree law to be

able to understand what an arbitrator’s powers are. In addition, Defendants cut off

access to the Purported Arbitration Agreement if a borrower complains about the


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loan. A35, ¶33. See also Ryan, 2016 U.S. Dist. LEXIS 121246 *17 (“Even if the

borrower read the delegation provision, the borrower would be unlikely to

understand its full implications because they only become clear in light of the

interaction between the delegation provision, the arbitration clause, and the choice

of law provision.”).

The Delegation Clause is also unconscionable because it limits the scope of

any arbitration to only “individual Disputes.” If arbitrators may only decide a case

involving one borrower, they will be unable to appreciate the scope of Defendants’

fraudulent scheme and to award a remedy to stop it.

Another reason why the Delegation Clause is unconscionable is because it

states that Chippewa Cree courts will provide the judicial review of any decision

issued by the arbitrator on arbitrability. But the Chippewa Cree courts do not have

jurisdiction to conduct that review. This lack of jurisdiction makes the Delegation

Clause unconscionable. Parnell, 2016 U.S. Dist. LEXIS 52516 at *32-33.

In the face of these arguments, the Payday Lenders cite Campaniello

Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 666 (2d Cir. 1997), and argue

that bare allegations of a scheme to defraud cannot be a basis for challenging an

arbitration clause. PL Br. at 22. However, Campaniello is inapposite. In

Campaniello, the plaintiffs were not specifically challenging the delegation clause,

but the arbitration agreement as a whole. Plaintiffs’ case here is actually closer to


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Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167 (1963), which is a

case the Campaniello court addressed. Campaniello distinguished Moseley on the

basis that the Moseley plaintiffs alleged that the arbitration clause allowed

defendants to avoid federal law. 117 F.3d at 667. This is precisely what Plaintiffs

have alleged here. A54 ¶¶126-127. Finally, Plaintiffs’ allegations of fraud relating

to the Agreement and the Delegation Clause are far more detailed than in

Campaniello. A50-55 ¶¶110, 112, 118-131.

3. The Delegation Clause Is Fraudulent.

The Delegation Clause was an essential part of Defendants’ fraudulent

scheme because they planned to use this clause to prevent federal courts from

examining their fraudulent practices. A55, ¶131. According to the Delegation

Clause, “[t]he arbitrator shall make written findings and the arbitrator’s award may

be filed with the Tribal court. The arbitration award shall be supported by

substantial evidence and must be consistent with this Agreement and Tribal Law,

and if it is not, it may be set aside by a Tribal court upon judicial review.” A265.

The Delegation Clause holds the key to keeping Defendants’ entire fraudulent

scheme from federal review. See Parnell, 2016 U.S. Dist. LEXIS 52516 at *30-31,

*33-34 (invalidating delegation clause based on fraud). It ensures that the case

will ultimately end up in a Chippewa Cree tribal court, which is the same tribal

court that has been so intimidated that it ignored the law. A279, ¶9; A280-85.


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Defendants complain that the allegations about the corruption at Plain

Green, the Tribe, and the Tribal Judiciary are insufficient to show that the

Delegation Clause is fraudulent. TD Br. at 42-43; PL Br. at 14. However, the

Complaint has detailed allegations showing the extensive and complex corruption

that exists at Plain Green, the Tribe, and the Tribal Judiciary. A55-57 ¶¶132-144.

The “Additional Allegations” that Plaintiffs supplied to the District Court show

more examples of corruption and intimidation of the Tribal Judiciary and the

Business Committee that Plaintiffs discovered after they filed their Complaint.

A277-279.10

Plaintiffs provided the District Court with the underlying documents

supporting these allegations. A280-85, A298-313, SA13-31, 94-133. These

documents include a joint FBI and Department of Interior investigation showing

that one tribal judge was so intimidated that he made a decision even though he

knew it was inconsistent with Chippewa Cree law. A280-85. This tribal judge

noted that “the removal of St. Marks as Chairman should never have been effective

because the Business Committee violated the CCT Constitution.” A281. The

judge entered the TRO removing St. Marks even though the request lacked

evidence and violated the Tribe’s Constitution because the judge felt intimidated.

A281. In addition, there is an interview with a tribal member who said that

10

Plaintiffs supplied the Additional Allegations to the District Court in

connection with its opposition to the various motions to dismiss. The allegations

related to facts discovered after Plaintiffs filed their Complaint.


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everyone on the Business Committee had received bribes. SA16. Since Plaintiffs

filed the Complaint, there have been several additional guilty pleas for corruption

at Plain Green. These guilty pleas include the former Chairman of Plain Green

who signed the Term Sheet, the former Chief Executive Officer of Plain Green,

and the former Chief Operating Officer of Plain Green. Plaintiffs’ allegations are

far from threadbare. TD Br. at 41.

This corruption also relates to the Delegation Clause. Plaintiffs have

identified three misrepresentations that specifically relate to the Delegation Clause.

First, the Delegation Clause contains a false claim that Chippewa Cree law is

legitimate. A54, ¶125; A265 (“The arbitrator has the ability to award all remedies

available under Tribal law . . . .”). As the corruption allegations show, the finance

code of the Chippewa Cree law is anything but legitimate. It was purchased by

Defendants and structured so that there are no remedies available to Plaintiffs. The

Delegation Clause’s choice of law provision creates a show trial where the

outcome is already determined by hidden actors.

Second, the Delegation Clause also misrepresents that Plain Green is the

Lender. The Delegation Clause states that the “parties agree that the arbitrator has

no authority to conduct class-wide arbitration.” A265(emphasis added). The

representations that Plain Green was a party to the agreement and the “Lender” are

false because the true lenders were the other Defendants, which Defendants


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fraudulently concealed. This representation affects the essence of the transaction.

Plaintiffs had to know with whom they were dealing before they could know

whom to sue. Plaintiffs did not know that hidden parties were controlling Plain

Green.

The Tribal Defendants argue that the fact that the Payday Lenders purchased

the Chippewa Cree “consumer finance laws” and not “the Tribe’s general contract

law, which the arbitrator would apply in evaluating Plaintiffs’ argument that the

arbitration agreement is invalid,” somehow means that Plaintiffs are not attacking

“the validity of the delegation clause but rather the validity of the underlying

agreement.” TD Br. at 41-42. This argument is not only confusing, but wrong. It

is not clear what, if any, distinct “contract law” exists under Chippewa Cree law.

The Tribal Defendants have never identified this contract law or provided any

decisions interpreting it to either Plaintiffs or the District Court. And the Payday

Lenders expressly cite the consumer finance laws that they purchased and argue

that the arbitrator should apply this law to decide whether the case is arbitrable.

PL Br. at 33.

The Tribal Defendants also argue that the absence of corruption allegations

in the arbitration organization means that the Delegation Clause is not fraudulent.

TD Br. at 42. This argument ignores the fact that the Payday Lenders purchased

the content of the law that the arbitrator applies both in determining arbitrability


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and the underlying merits of the case. See supra at 58-62, 75, 87. It also ignores

the fact that Defendants “may” confirm any decision made by the arbitrator in the

Chippewa Cree tribal courts where Defendants have the ability to intimidate judges

to obtain the ruling they desire.

Defendants also make the remarkable argument that a court may only

address corruption after the corrupt process is complete. TD Br. at 38, 45. The

FAA does not require this. Under Section 2, the Court must act before an

arbitration commences: “If the making of the arbitration agreement or the failure,

neglect, or refusal to perform the same be in issue, the court shall proceed

summarily to the trial thereof.” 9 U.S.C. §2; SPA 78. In Rent-A-Center, the

Supreme Court held that courts must resolve challenges to the validity of

arbitration agreements before ordering compliance under Section 4. 130 S. Ct. at

2778. In fact, Section 2 allows for the party facing a motion to compel arbitration

to have a jury trial on any factual issues that would invalidate the agreement.

Plaintiffs have requested this jury trial.

The fact that Section 10 of the FAA provides additional remedies after an

arbitration is complete, if “the award was procured by corruption, fraud, or undue

means,” does not mean that a court cannot act before an arbitration to prevent a

fraud. 9 U.S.C. §10; SPA79. The reason that the FAA allows awards to be

overturned after an arbitration is that fraud may occur during the administration of


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an arbitration that could not be detected before the arbitration began. In this case,

the Court does not need to wait until after the arbitration process occurs because

there is already substantial evidence of fraud.

4. Defendants Incorrectly Identify The Delegation Clause.

Defendants argue that the part of the Agreement that defines the term

“dispute” is the delegation clause, but this is incorrect. According to Defendants

the delegation clause states: “A Dispute includes, by way of example and without

limitation, any claim arising from, related to or based upon marketing or

solicitations to obtain the loan and the handling or servicing of your account

whether such Dispute is based on a tribal, federal or state constitution, statute,

ordinance, regulation, or common law, and including any issue concerning the

validity, enforceability, or scope of this loan or the Agreement to Arbitrate.”

A115; see TD Br. at 36; PL Br. at 26. But this is not a delegation clause because it

does not identify the powers of the arbitrator. See Rent-A-Center, 130 S.Ct. at

2777.

In Rent-A-Center, the Supreme Court determined that the phrase “‘[t]he

Arbitrator . . . shall have exclusive authority to resolve any dispute relating to

the . . . enforceability . . . of this Agreement including, but not limited to any claim

that all or any part of this Agreement is void or voidable’” was the delegation

clause. 130 S.Ct. at 2777. In this case, the phrase that sets forth the powers of the


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arbitrator is not the sentence on page A115 that Defendants identify. It is the

paragraph found at A265, which Plaintiffs quoted above.

5. Plaintiffs Are Specifically Challenging The Delegation Clause.

Even though Plaintiffs have made it clear that they are specifically attacking

the Delegation Clause of the Agreement, Defendants continue to argue that

Plaintiffs are not doing so. TD Br. at 43; PL Br. at 17. Plaintiffs allege in their

Complaint that they are specifically attacking the Delegation Clause. A55, ¶131.

They also spent seven pages in their Opposition to the Motion to Dismiss detailing

their specific attacks on the Delegation Clause. Doc. 85 at 57-63.

If Defendants’ argument is that specific attacks on delegation clauses must

only be in complaints (PL Br. at 21), they are wrong. Rent-A-Center looked to an

opposition to a motion to compel to determine whether there was a specific

challenge to a delegation clause. Rent-A-Center, 130 S. Ct. at 2779. The Eleventh

Circuit also recently confirmed that a specific attack on a delegation clause can be

made in an opposition to a motion to compel arbitration. Parm, 835 F.3d at 1335

n.1; see also Hayes, 811 F.3d at 671 n.1; Parnell, 2016 U.S. Dist. LEXIS 52516 at

*30-31.

Defendants may be saying that any attacks on a delegation clause must be

unique to the delegation clause. But the Think Finance Defendants disavowed that

argument in their Reply Brief in the District Court. Doc. 95 at 3 n.3. They were


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correct in doing so. Under Rent-A-Center, the party opposing arbitration need only

make a challenge that is specific to the delegation clause; it does not matter if the

party also challenges other parts of the arbitration agreement. Rent-A-Center, 130

S. Ct. at 2778-79. In Rent-A-Center, the Court noted that “Section 2 [of the FAA]

operates on the specific ‘written provision’ to ‘settle by arbitration a controversy

that the party seeks to enforce. Accordingly, unless Jackson challenged the

delegation provision specifically, we must treat it as valid under §2, and must

enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement

as a whole for the arbitrator.” Id. at 2779 (emphasis added). The Court said that

Jackson had to challenge the delegation provision “specifically,” not “uniquely.”

Id. at 2779. The Supreme Court stated: “The District Court correctly concluded

that Jackson challenged only the validity of the contract as a whole. Nowhere in

his opposition to Rent-A-Center’s motion to compel arbitration did he even

mention the delegation provision.” Id. (emphasis added). In other words, if a

reason exists for independently invalidating the delegation provision, it does not

matter if that argument will also invalidate the arbitration agreement as a whole.

D. The Payday Lenders Cannot Take Advantage Of The Purported

Arbitration Agreement.

Each of the Payday Lenders tries to take advantage of the Purported

Arbitration Agreement, but none of them is entitled to do so. PL Br. at 46.

Plaintiffs did not agree to arbitrate with any of them. Despite Defendants’


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contention that the arbitration clause is broadly worded, it does not extend to all

Defendants. The Purported Arbitration Agreement states: “A ‘Dispute’ is any

controversy or claim between you and Lender, its marketing agent, affiliates,

assigns, employees, officers, managers, members or shareholders (each considered

a ‘Holder’ for purposes of this Agreement).” A264. The Agreement does not

mention Rees, the Think Finance Defendants, or either of the Silicon Valley

venture capital firms that were clandestinely running the payday loan scheme.

“It is black letter law that an obligation to arbitrate can be based only on

consent.” Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354, 358 (2d Cir.

2008). To determine whether a third party can estop a signatory to an arbitration

agreement and require them to arbitrate, this Circuit employs a two-part test. First,

the factual issues regarding Plaintiffs’ dispute with Plain Green must be

“intertwined” with the dispute with Defendants. See id. at 359. Second, “there

must be a relationship among the parties of a nature that justifies a conclusion that

the party which agreed to arbitrate with another entity should be estopped from

denying the obligation to arbitrate a similar dispute with the adversary which is not

a party to the arbitration agreement.” Id. In examining the second prong of this

test, defendants that come by their relationship through wrongful means cannot

avail themselves of the benefits of the arbitration agreement. Id. at 362. In

addition, any presumption in favor of arbitration that may exist does not apply to


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the question of whether an agreement to arbitrate has been made. Applied

Energetics, Inc. v. Newoak Capital Mrkts., LLC, 645 F.3d 522, 526 (2d Cir. 2011).

The estoppel inquiry is fact specific. Ross v. American Express, 547 F.3d 137, 144

(2d Cir. 2008).

The Payday Lenders fail the second prong of this test. The relationship that

Rees and Think Finance created between the Plain Green enterprise and the

Payday Lenders was designed to further a fraud. The Complaint alleges that the

Think Finance Defendants pretended to provide services to Plain Green to conceal

the fact that they were actually running the fraudulent enterprise. To further their

fraud, Rees and the Think Finance Defendants tried to make themselves look like

agents of Plain Green. As a result, this relationship cannot be used as a basis to

sweep the Payday Lenders into the Purported Arbitration Agreement. Sokol

Holdings, Inc., 542 F.3d at 362.

Second, none of Defendants is an actual agent of Plain Green. A claim of

agency requires facts establishing: (1) the manifestation by the principal that the

agent shall act for him; (2) the agent’s acceptance of the undertaking; and (3) the

understanding of the parties that the principal is to be in control of the undertaking.

Allen v. Dairy Farmers of Am., Inc., 748 F. Supp. 2d 323, 342 (D. Vt. 2010)

(citations and quotations omitted). An essential characteristic of an agency

relationship is that the agent acts subject to the principal’s direction and control.


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Id. (citations omitted); Kimco Leasing Co. v. Lake Hortonia Properties, 161 Vt.

425, 429 (1993) (agent must be subject to the principal’s control). The party

asserting that agency exists bears the burden of proof on that issue. Id.

Whatever the term “agent” means, it does not mean an undisclosed, criminal

mastermind. The Complaint does not allege that Rees or the Think Finance

Defendants are agents. It alleges that Rees and the Think Finance Defendants

dominated and controlled Plain Green. A33, 39, 42-46 ¶¶23, 54-56, 58, 69-71, 77-

91. Plaintiffs have also alleged that Rees and the Think Finance Defendants

deliberately attempted to conceal their control by claiming that they were only

providing “services.” A48 ¶101. The Court must accept Plaintiffs’ allegations as

true. Schnabel, 697 F.3d at 113; Gent v. Wallingford Bd. of Educ., 69 F.3d 669,

674-75 (2d Cir. 1995)(holding that Court must accept as true Plaintiff’s

characterization of document attached to the complaint).

The Payday Lenders incorrectly claim that Plaintiffs alleged that Rees and

the Think Finance Defendants are agents of Plain Green. PL Br. at 50. This is

false; Plaintiffs never alleged this. The Payday Lenders selectively cite three

words, “on behalf of,” from paragraph 109 of the Complaint and argue that this

somehow means that Plaintiffs allege that Rees and the Think Finance Defendants

are agents. The Payday Lenders’ selective reference ignores the context and

meaning of the paragraph, which alleges that Rees and the Think Finance


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Defendants dominated and controlled the officers of Plain Green. A33, 39, 42-46

¶¶23, 54-56, 58, 69-71, 77-91. The Payday Lenders also ignore allegations that

show that when Rees and the Think Finance Defendants appeared to act on behalf

of Plain Green, they did so with the actual intent of avoiding liability and

furthering a fraud. For example, Paragraph 99 alleges: “Despite their actual

control of the Enterprise, Defendants Rees and Think Finance have attempted to

create the appearance of separate corporate forms and attempted to distance

themselves from the enterprise through the execution of various legal documents.

Defendants Rees and Think Finance have also created a number of different

subsidiaries like Defendants Tailwind Marketing, TC Decision Sciences, and TC

Loan, to isolate and decrease any legal liability they may face.” A47. Paragraph

101 states that “Defendants Rees and Think Finance hoped to avoid liability by

falsely claiming that they only provided services to Plain Green, when in reality

they created the whole enterprise and ran its operations through an assortment of

subsidiaries and affiliates like Defendants Tailwind Marketing, TC Loan, and TC

Decision Sciences.” A48. By selectively focusing on only three words of the

Complaint, the Payday Lenders have not provided a fair reading of the

Complaint.11

11

None of the other paragraphs that Defendants cite show that any agency

relationship existed between Plain Green and Rees and the Think Finance

Defendants. Paragraphs 89, 90, 109, 152, and 153 allege that Rees and Think


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The Payday Lenders also fail to establish that their participation in a

fraudulent enterprise entitles them to any form of estoppel. This Circuit has tended

to allow estoppel only when the relationship between entities is a formal corporate

relationship – not an ad hoc collection of participants in a fraudulent enterprise.

As this Court noted in Ross: “But this Court’s cases which have applied estoppel

against a party seeking to avoid arbitration have tended to share a common feature

in that the non-signatory party asserting estoppel has had some sort of corporate

relationship to a signatory party; that is, this Court has applied estoppel in cases

involving subsidiaries, affiliates, agents, and other related business entities.” Ross,

547 F.3d at 144 (emphasis in original). The Payday Lenders have failed to meet

their burden of showing that such a relationship exists. Mr. Hargrove, the new

Chief Operating Officer of Think Finance who filed an affidavit to support the

Think Finance Defendants’ motion to compel arbitration, spends no time

describing the actual relationship between the Payday Lenders and Plain Green.

A96. He provides none of the underlying agreements that would illuminate the

relationship. He does not provide any correspondence or other documents that

would clarify Think Finance’s actual operation of the Plain Green enterprise. He

Finance controlled and dominated other participants in the fraudulent scheme.

They do not support the claim that the Payday Lenders were agents of either Plain

Green or the Tribal Defendants.


- 102 -

also lacks personal knowledge because he was not at Think Finance during the

relevant time period. In the end, Mr. Hargrove’s affidavit does nothing to help

Defendants meet their burden of showing that estoppel would be appropriate. See

Ross, 547 F.3d at 144.

The BMO cases cited by the Payday Lenders cite are distinguishable. Each

of these cases involved originating depository financial institutes (“ODFIs”),

which were entities that processed wire transfers. Booth v. BMO Harris Bank, No.

13-5968, 2014 U.S. Dist. LEXIS 111053 at *3 (E.D. Pa. Aug. 11, 2014); Graham

v. BMO Harris Bank, No. 3:13CV1460, 2014 U.S. Dist. LEXIS 4090548, *9-10

(D. Conn. July 16, 2014); Gunson v. BMO Harris Bank, N.A., 43 F. Supp. 3d 1396,

1397-98 (S.D. Fla. 2014); Moss v. BMO Harris Bank, N.A., 24 F. Supp. 3d 281,

284 (E.D.N.Y. 2014). None of the ODFIs were in the same position as Rees and

Think Finance, who served as the leaders of a fraudulent criminal enterprise. As a

result, none of the cases support the Payday Lenders’ arguments here. Moreover,

the BMO plaintiffs did not seem to be aware of Think Finance’s actual role in the

fraudulent scheme.

Finally, the Payday Lenders argue that they are third-party beneficiaries of

the Purported Arbitration Agreement. However, this Court has recognized that

“[w]here, as here, a non-signatory moves to compel arbitration with a signatory, it

remains an open question in this Circuit whether the non-signatory may proceed


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under any theory other than estoppel.” Ross, 547 F.3d at 143 n.3. But even if the

Court decided to permit a third-party beneficiary approach, the Payday Lenders

would not meet the requirements. To qualify as a third-party beneficiary, the

parties to the contract must have intended to confer a benefit on the third party.

See Cargill Int’l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1019 (2d Cir. 1993).

As discussed above, none of the Payday Lenders was named in the Agreement

either by name or by description. And Plaintiffs had no idea that these entities

existed or what their roles were in the Plain Green enterprise. Accordingly, the

Payday Lenders cannot be considered third party beneficiaries.

III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN

ALLOWING DISCOVERY.

Plaintiffs are entitled to discovery to fully investigate the fraudulent

enterprise alleged in the Complaint and the current corruption that is affecting the

Chippewa Cree Tribe. Since the filing of the Complaint, Plaintiffs have uncovered

additional facts relating to the Plain Green enterprise, including additional

predicate acts under RICO that tribal officials have committed. Plaintiffs sought

leave to amend their Complaint in the District Court, but the District Court did not

reach that issue. Doc. 85 at 15 n.3 and 54 n.12; see also Doc. 128 at 3. Instead,

the District Court granted Plaintiffs discovery to investigate the additional facts

and identify the perpetrators of the wrongdoing. SPA 63-64 (“The Court will also


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permit Plaintiffs to discover facts related to the “additional allegations.”). The

Court also granted discovery to uncover additional facts about the Silicon Valley

venture capital firms’ role in the fraudulent enterprise. SPA25.

The Tribal Defendants argue that Plaintiffs did not cite any authority to

support the proposition that discovery may be ordered before a ruling on

arbitrability. TD Br. at 47. But Plaintiffs did just that. Pre-arbitration discovery is

available to determine whether a particular arbitration provision is unconscionable.

Doc. 85 at 71 (citing Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d

764, 774 n.5 (3d Cir. 2013)).

The Tribal Defendants also argue that no Court has allowed discovery into

corruption of a foreign sovereign. TD Br. at 47. But that is not true. For example,

in Chevron Corp., this Court authorized discovery into corruption in the

Ecuadorian judicial system. Chevron Corp. v. Berlinger, 629 F.3d 297, 303, 306

(2d Cir. 2011) (allowing discovery from filmmaker who had footage of plaintiffs’

attorney describing how he pressured an Ecuadorian judge to rule in plaintiffs’

favor).

Although both the Agreement and the Delegation Clause are unenforceable,

if the Court does not affirm the District Court’s decision, the Court should, at a

minimum, remand the case for discovery and allow the District Court to rule on

Plaintiffs’ request to amend the Complaint. Alternatively, Plaintiffs request leave


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from this Court to amend their Complaint if the Court rules that the Complaint is

insufficient.

Even if the Court does not agree with the District Court’s decision to permit

pre-arbitration discovery in this case, Plaintiffs are still entitled to a jury trial to

present the facts they have collected and to resolve whether they were fraudulently

induced into agreeing to the Purported Arbitration Agreement and the Delegation

Clause. 9 U.S.C. §4; see also Schnabel, 697 F.3d at 113. The District Court never

reached the issue of whether a jury trial needed to occur because it concluded that

as a matter of law the Agreement and the Delegation Clause were unenforceable.

If this Court reverses on that issue, it should remand the case to the District Court

for a jury trial.

Conclusion

Plaintiffs have alleged that Defendants engaged in a fraudulent loan sharking

scheme that violated both state and federal law. This Court should affirm the

decision of the District Court and stop this illegal enterprise.

Respectfully submitted,

/s/ Kathleen M. Donovan-Maher /s/ Matthew B. Byrne

Kathleen M. Donovan-Maher Matthew B. Byrne

Steven J. Buttacavoli GRAVEL & SHEA PC

Anne F. O’Berry 76 St. Paul Street

Steven L. Groopman 7th Floor

BERMAN DEVALERIO P.O. Box 369

1 Liberty Square Burlington, VT 05402-0369

Boston, MA 02109 (802) 658-0220

(617) 542-8300


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CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(a)(7)(C), I hereby certify that this Brief

complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because

the Brief contains 24,754 words, excluding the parts of the Brief exempted by Fed.

R. App. P. 32(a)(7)(B)(iii).

I further certify that this Brief complies with the typeface requirements of

Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P.

32(a)(6) because the Brief has been has been prepared in Times New Roman 14-

point font using Microsoft Word 2010.

Respectfully submitted,

/s/ Kathleen M. Donovan-Maher /s/ Matthew B. Byrne

Kathleen M. Donovan-Maher Matthew B. Byrne

Steven J. Buttacavoli GRAVEL & SHEA PC

Anne F. O’Berry 76 St. Paul Street

Steven L. Groopman 7th Floor

BERMAN DEVALERIO P.O. Box 369

1 Liberty Square Burlington, VT 05402-0369

Boston, MA 02109 (802) 658-0220


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